• Like
Loyalty Updated
Upcoming SlideShare
Loading in...5

Thanks for flagging this SlideShare!

Oops! An error has occurred.


Loyalty, Advocacy, Ambassador. It's current - and it's timeless. The brand gives, the brand receives.

Loyalty, Advocacy, Ambassador. It's current - and it's timeless. The brand gives, the brand receives.

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
No Downloads


Total Views
On SlideShare
From Embeds
Number of Embeds



Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

    No notes for slide


  • 4. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGN “The well-documented connection between customer loyalty and profit margins has encouraged many companies to launch so-called loyalty programs, using incentives or contracts to ‘lock in’ customers. Trouble is, customers don’t like to be locked in. It makes them disloyal. Not only that, loyalty programs are expensive to manage and easy to copy.” Marty Neumeier, The Designful Company “Marketers need engagement to create long-lasting brand relationships, but how should they try to create these – and with whom? Traditionally, loyalty programs have provided transactional interactions with customers. But marketers who embrace social loyalty – brand affinity built on the connection of consumers to the brand as well as to each other – can use it to move their loyalty programs from mercenary rewards to a portal for identifying, creating, and nurturing high-value customers.” Lisa Bradner, Forrester Research2INTRODUCTION: A NEW PARADIGM IN RELATIONSHIP MARKETINGAs the communications landscape continues to redefine how people purchase products and services, relationship marketingpractices such as loyalty programs must be reinvented from a much broader perspective. Traditionally, loyalty programshave been built on foundations designed for 20th-century marketing. These are rooted in product-centric opt-in programs thatreward transactions and are supported by one-way communications focused on rational value propositions such asdiscounts, gift with purchase, points, and the like. Industry data widely documents the benefit of at least complementing 3coupon or points-based programs with a more comprehensive approach.Recent Forrester research shows that when compared to non-subscribers, those who subscribe to loyalty programs exhibitmore intense mercurial consumption patterns such as price-based decisions, comparison-shopping, and others. This is truein most classic loyalty categories and markets such as retail (see figure 1), hospitality, and travel. At face value, the dataindicates that when this approach becomes the sole focus of the relationship marketing organization, it tends to drivebehavior that is detrimental to long-term business. 4
  • 5. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNFigure 1: Loyalty Program Subscribers’ Shopping Habits WAIT UNTIL ITEMS GO ON SALE SEARCH FOR AND USE ONLINE COUPONS DO MORE RESEARCH ONLINE TO GET BEST PRICE TRY LOWER COST ALERTNATIVE TO THE BRANDS I BUY SUBSCRIBERS USE SEARCH ENGINES AND NON SUBSCRIBERS COMPARISON SHOPPING SITES 0% 10% 20% 30% 40% 50% 60% Source: ForresterIn order to really appeal to today’s customer needs, modern relationship marketing programs must evolve and complementthe traditional focus on transactional loyalty with reward systems that address emotional needs often related to socialconsumption and a reputation economy amplified by digital media. Wikipedia’s definition of relationship marketing offers anexcellent point of departure: “… a long-term and mutually beneficial arrangement wherein both the buyer and seller focus on value enhancement with the goal of providing a more satisfying exchange. This approach attempts to transcend the simple purchase-exchange process with customers to make more meaningful and richer contact by providing a more holistic, personalized purchase, and use the consumption experience to create stronger ties.” 5
  • 6. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNThis definition is today more relevant than ever as modern consumers demand a more purposeful approach to marketing,one that is focused on their needs and their communities and that consistently adds value at every stage of their journey. A“long-term and mutually beneficial arrangement” between brands and increasingly more sophisticated consumers requires“value enhancements” that transcend the transactional space.Only multidimensional brand experiences can “transcend the simple value-exchange process with customers to make moremeaningful and richer contact” that rewards customers and advocates holistically while contributing to build true brand equity.Broad access to information in a connected environment facilitated by social media channels drives complexity when itcomes to adding true value and rewarding transaction, engagement, and other important brand-consumer and consumer-consumer interactions. This reward system can be synthesized in four areas (see figure 2) going from transactional loyaltyrewards to emotional loyalty rewards: 1. Transaction: Transactional rewards are the basis of most loyalty programs, they appeal to the most basic value exchange and even though they can be easily replicated, they can also drive trial and temporarily break through mercurial consumption. 2. Individuality: Rewarding program engagement (opt-in communications, survey completion, etc.) with personalization is another common feature of loyalty programs and in most cases is expected by consumers. This has most value when closely tied to a status system that rewards the most valued customers with access to better service, more features, etc. 3. Community: Rewarding active loyalty (participation in community or advocacy initiatives) with social capital (e.g. public recognition, access to social filters, peer reviews, etc.) starts to build a sense of belonging that is essential for deeper brand loyalty. These rewards also recognize the fact that active advocates can be as important (if not more) to the brand as high-status customers that are not well connected and/or influence their social circles. 4. Co-Ownership: Rewarding the most valued customers (either due to status or advocacy potential) with a stake in the brand motivates consumers to become part of a common enterprise. Their reward is symbolic capital (e.g. be the first to know, perceived reputation enhancement, etc.) which has an important value in today’s reputation economy. 6
  • 8. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGN “Our goal is to take this beyond transactional loyalty to create emotional loyalty and brand love.” Michael La Kier, director, My Coke Rewards, Coca-Cola North America, in an interview with eMarketer, November 17, 2009.MY COKE REWARDS: BEYOND TRANSACTIONAL LOYALTYAt its worst, transactional loyalty intensifies disloyal behavior, as it emphasizes hard currency (e.g. points, coupons) as thekey benefit in the brand-consumer relationship. At its best, transactional loyalty uses hard currency as a method to createcommunity and drive relevance in the context of key brand beliefs. That is the case of Coca-Cola Co.’s My Coke Rewardsprogram, which offers consumers the opportunity to redeem points after opening an account at mycokerewards.com.My Coke Rewards uses hard currency as a stepping-stone for a meaningful brand experience that departs out of Coke’sbrand belief of promoting happiness. While participants (eMarketer reports over 13 million members) can redeem their pointsfor brand-relevant gifts such movie tickets, photo books, and the like, they can also donate points to local causes (e.g.elementary schools) and connect with other members who contribute to similar organizations.Beyond cause marketing, Coke also gives its most loyal customers a stake in the brand through the opportunity tocontribute to package design and other similar initiatives via My Coke Rewards. In the summer of 2009, Coke Classiclaunched a can design competition which drove nearly 35,000 designs and served as the basis for content sharing activitiesacross multiple social media platforms beyond mycokerewards.com. Coca Cola recognizes that brand loyalty must evolvebeyond transactional loyalty, and in doing so employs transactional loyalty as a point of departure for a deeper brandexperience that sits at the intersection of community, content, and commerce, and actively contributes to build brand equity. 8
  • 10. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGN21ST-CENTURY BRANDS DEMAND NEW BUILDING BLOCKSThe new communications landscape continues to put pressure on all marketing disciplines when it comes to contribute to theoverall brand equity. Modern relationship marketing thinking cannot be divorced from the overall brand building effort. In therecent past, brand building has been relegated to a predetermined set of mass media channels. Today, we have a betterunderstanding of the levers that drive brand equity of which brand experience plays an increasingly important role.Relationship marketing must contribute to brand equity (and therefore to the bottom line) through positively impacting keylevers via a customer-centric brand experience approach consistent with the core principles of design thinking. This can beachieved through employing three basic building blocks: 1. Establish a needs-based journey: Deep understanding of customer needs throughout their journey and how changes in external environment impact them. 2. Integrate brand “think” with “do”: Successful loyalty programs ultimately become brand experiences consistent with core brand belief. 3. Nurture communities of active loyalists: Optimize the marketing dialogue to share brand ownership with diverse groups of active loyal customers. Inspire passive loyalists to become active.FOCUS ON BRAND EQUITYBrand equity is driven by a number of brand assets and is directly associated with strong business performance. Proprietaryresearch from RAPP as well as various studies from McKinsey, QSA Research, Forrester, and others converge in several 4,5,6,27drivers of brand equity which we synthesize in four levers: 1. Industry leadership: Directly impacted by management’s commitment to innovation. Those brands perceived to be in a solid leadership position enjoy an advantage in a highly competitive environment and during times of financial duress. 2. Product quality: Also directly impacted by the organization’s ability to out-innovate competitors and offer a consistent experience. 3. Brand belief: This is driven by the brand’s purpose in society. What problem is the brand solving? Successful brands have a strong belief or position that is articulated consistently throughout all channels. Brands that effectively communicate a relevant belief have a higher rate of success in establishing a positive and fresh image. 4. Brand behavior: Driven by the brand belief, this is how consumers experience the brand throughout their journey. Strong brands can identify value gaps in the customer journey and address them in imaginative ways. Modern loyalty programs are expressions of brand behavior.The following illustrates how these principles can impact loyalty and overall marketing communications strategy while directlycontributing to strengthening the drivers of brand equity. 10
  • 11. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNConsumers are loyal to Customer needs in the post- Addressing real needsbrands that continuously purchase experience can throughout the journey leadsevolve to answer their needs. often lead to product to a better customerNetflix offers a relevant innovation or product experience in sometimesexample as the brand that extension ideas that unexpected ways. Fornot only reinvented the maximize customer loyalty. example, a McKinsey studycategory – by answering This is most evident in the on needs-based marketingconsumer demand on two weight-loss industry that has identified that “more than 60levels: 1) using the internet to developed behavioral support percent of consumers oforder movies while using programs to address value facial skin care products… gomail for DVD handling, and 2) gaps in the customer online to conduct furtherusing data analytics to experience (education, peer research after theimprove movie selection – support, and the like). These purchase…” Addressing thisbut that also continues to programs are an integral part need not only drives loyaltydevelop new and relevant of both loyalty strategy and via a better experience butproducts via integration with product quality. contributed to brand equity.Sony Playstation 3 andstand-alone digital box. Modern loyalty programs are in reality comprehensive brand experiences that bring to life the brand position or belief via interactive features and services. The Italian brand Fiat offers a great example with its Eco:Drive program in Europe, which offers customers a device to assess their driving style in a community setting while offering personalized techniques, to minimize fuel consumption. This program not only drives loyalty but also brings to life Fiat’s brand promise of fuel-efficiency in a unique and relevant manner.Differentiating the brand via While the Starbucks example Even a well-established, well-an outstanding brand also applies to this driver (the entrenched company likeexperience not only builds brand has effectively Kraft Foods realizes that notloyalty but also requires a implemented a wide number only do today’s consumerscommitment to innovation. of advocate-driven ideas), want a stake in their favoriteThis in turn drives the whole there are other initiatives that brands – but that they canorganization to consider have been designed to work actually help their brandsloyalty marketing as a harder for product quality perform. Kraft has set up ancatalyst for improved improvement as opposed to entire – secure – innovatorexperiences, brand sharing focus with brand site to allow its consumers aextensions, and new brand listening and community chance to co-developbehaviors that often offer a discussion, as Starbucks products. The company’sservice to consumers. This is effectively achieves. Lego Vegemite brand, bettera constant in most category offers a better example of known in Australia, showsleaders and successful comprehensive product that consumer involvementchallengers. It is easy to see quality improvement and with updating the recipe for ahow “My Starbucks Idea” innovation via activating its ‘leaner/healthier’contributes to loyalty via most loyal advocates, from contemporary audience hassharing brand ownership with non-professional consumers lead the brand to resurgentactive advocates at the same via Lego Factory to engaging 25 sales and popularity.time that it contributes to professionals and amateurStarbuck’s leadership programmers via Legoposition as it drives a Mindstorms, the brand offerstangible, better experience. a sophisticated platform for consumers to develop a long- term profitable relationship while actively contributing with product quality. 11
  • 12. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNDESIGNING BRAND EXPERIENCESAs sources of information continue to diversify limiting the brand’s ability to consistently communicate with and, moreimportantly, add real value to its customers, marketers must carefully design brand experiences that balance push and pullmarketing while address tangible consumer needs inspiring active loyalty.The first step in the process is to establish a needs-based journey that can act as an organizing principle for meaningfulbrand experiences.I. THE NEEDS-BASED JOURNEY: A BLUEPRINT FOR BRAND EXPERIENCESIn a study of the “consumer decision journey,” a group of McKinsey principals explain how “the funnel concept fails to captureall the touch points and key buying factors resulting from the explosion of product choices and digital channels, coupled withthe emergence of an increasingly discerning, well-informed consumer.” The study argues for a more comprehensive set ofguiding principles that take into consideration new information-seeking behavior and a fundamental shift in the decision- 27making behavior that leads to purchases.Data from Forrester, IBM, Trajectory, and others confirms this assessment and further highlight the need to rethink the funnelto incorporate not only information-seeking and active evaluation behavior but also the impact of social media, cross-mediashopping, and other emerging and already mainstream trends that have decisively reshaped purchase behavior and 6therefore brand loyalty.At RAPP, we have organized these principles and requirements in a four-stage needs-based journey (see figure 3) that hasbeen successfully applied to a wide range of industries, from retail to consumer packaged goods to automotive, healthcareand entertainment. 12
  • 13. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNFigure 3: Needs-Based JourneyToday’s marketers are beginning to understand the importance of a consistent brand experience throughout this journey. Forexample, Procter & Gamble focuses on the category-generic information-seeking behavior that occurs at the Point ofDeparture phase among young women in the feminine-care space to address specific needs via BeingGirl.com. 13
  • 14. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNBEINGGIRL.COM: ADDING VALUE TO YOUNG WOMEN VIA FACILITATING CATEGORY-RELEVANT DISCOVERY AND EVALUATIONLaunched in 2000, BeingGirl.com offers an excellent example of a loyalty platform that accelerates behavior by addressingneeds at the beginning of the customer journey (teen girls want information but are embarrassed to discuss with adults) andfacilitating the evaluation process expected in Discovery and Evaluation phase in an environment that creates an advantagefor P&G brands.With over 400,000 unique visitors per month, extremely high cross-visitation with Procter & Gamble brands (e.g. 500x morelikely to visit Tampax.com per Quantcast estimate in November 2009), and high levels of engagement (36% are regularvisitors, 23% “addicts” per Quantcast) this initiative is addressing a real need and accelerating the behavior of qualifiedcustomers through the journey. 14
  • 15. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNCOMCAST: DIVERSIFYING MARKETING INVESTMENT TO EXTEND THE BRAND EXPERIENCEComcast, on the other hand, has developed a variety of needs-based programming for its customers centered primarily onthe brand experience cycle.Traditionally, cable company brand behavior has aligned in step with that of telephone companies – behaving as regulatedmonopolies, taking their consumers for granted. Because of deregulation, however, cable companies were forced into a newworld of competing for customers, and that means major adjustments in corporate culture and brand behavior.Comcast, based on its efforts to more closely align with their consumers (described below), has become a corporate rolemodel in terms of brand behavior and taken a leadership position in its category. SUPPORT As a technology-based company, Comcast has embraced social media to dialogue real-time with its customers. Via the handle Comcastcares on Twitter, the brand has more than 35,000 followers who dialogue with a dedicated, real-life company representative. Comcast customers – who at times have shown concern with the company, in terms of service, pricing, etc. – now express confidence in their cable company. In fact, the flowing exchange of information between company and consumer, and even potential consumer, has become a source for pride for the brand. Consumers are enabled. Facilitated by the brand platform, consumers help each other solve service problems, offer tips, and provide solutions. 15
  • 16. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNUNDERSTANDINGAlong a different path in the brand experience cycle, Comcast has developed a digitalentertainment platform called Fancast.com to service the needs of a growing segment of itsconsumers who watch their television through the Internet.Fancast offers Comcast cable subscribers the chance to watch their programming on demand andwherever they want – they’re no longer tethered to their television set.Fancast also provides consumers with a library of both current and historical television shows andmovies. The site receives about 2.5MM visitors each month, who receive the freedom and controlthey want in watching their television shows.Comcast CEO Brian L. Roberts recognizes that to connect with consumers is to align with theirneeds, and is positioning his company to “give consumers choice, becoming a leader in thedevelopment of multiplatform ‘anytime, anywhere media’ that American consumers aredemanding.”DEPTH – INVOLVEMENT – CARE: COMMUNITY CONNECTIONCommunity involvement is a third platform where Comcast has made an investment to reach theneeds of its consumers. We argue corporate citizenry in the telecom category plays a moreimportant role in terms solving the emotional ‘community/paternal’ needs of its consumers.Comcast’s investment of more than $1.4 billion to connect and build relationships with local andnational non-profit organizations, including the National Urban League, National Council of LaRaza, and Big Brothers Big Sisters, shows its customers its commitment to the well-being andimprovement of the community it serves.A particular area of focus is the company’s sponsorship of foundations aimed at providingleadership, education and digital literacy programs.Comcast Cares Day is the company’s largest nationwide community-service effort, with 60,000Comcast employees volunteering in one single day.BUILDING A LEADEROverall, Comcast’s diversified efforts in loyalty marketing, centered around the brand experiencecycle, have helped the company grow to a base of over 23MM US subscribers, take on aleadership position in the category, and enable an acquisition of one of the country’s televisionbroadcast pioneers in NBC Universal. 16
  • 17. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNRETAIL TRENDS //NEEDS-BASED JOURNEYOnline collaboration and social tools challengeretailers to rethink their role and nature of thephysical spaces they create to captivate theircustomers. Mobile and internet are seen asenhancing and empowering tools that blend thetwo worlds together. Consumers want to makeinformed purchasing decisions, and they leantowards trusting the opinions of their peers overadvertising or salespeople. Consumers needaccess to this information, so many retailers aretaking steps to not only simplify access butenhance the experience when doing so.SHOPSAVVY VERIZON 17
  • 18. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNMOBILE SHOPPING APPSA major consumer trend while shopping is to use mobile devices to access information. Whether consumers are on the golooking for a store location, searching for product information and reviews, or trying to access their personal networks to seek rd-input for their purchase decision, the phone has become an important shopping tool. There are a number of retailer- and 3party-developed applications built to help facilitate this process in a more consumer-friendly way. ShopSavvy The ShopSavvy mobile application uses the phone’s camera to ‘scan’ the barcode of any product to find the best prices on the internet and at nearby, local stores. You can also read online reviews and save scanned items to a wish list to purchase them later or receive price-update alerts. Sephora – MobileVoice App Sephora found research that 92% of consumers have more confidence in information they seek out online than in insights from a sales clerk. They developed MobileVoice to provide easy access to the reviews from their online store to shoppers who were in their physical store. “It’s like having all your best customers advise all your in-store shoppers.”MERGING E-COMMERCE WITH PHYSICAL SHOPPINGMany brands have both physical and e-commerce store presence, and cross-channel shoppers who purchase offline willlikely research online prior to coming to the store. Leveraging online tools and experiences within the physical store brands 37not only brings familiar online shopping elements offline but can create convenience. Apple Retail Stores A brand experience in-store ends with checkout; long waits can taint an otherwise positive experience. When you walk into an Apple Store the lines appear to be long but they move surprisingly quickly. Store employees are equipped with an iPod Touch that features a mobile checkout application that can process payments and email receipts directly to the customer. Not only does this speed up checkout, but there’s the added convenience of never having to worry about losing your receipt. Verizon Retail Stores Verizon links the online interactive store finder to an in-store experience with their interactive displays. Consumers in the store can use the display to search through plans and phones, customize a plan based on your area, check coverage maps and pricing information. Since all the data is linked to a central database, store employees can be sure to be up to speed on the latest product information and promotions.!!!! 18
  • 19. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNII. INTEGRATING BRAND “THINK” AND “DO:” LOYALTY MARKETING ACTIVATES THE BRAND BELIEFToday’s marketing requires brand to go well beyond positioning and into actually having a position. The key questions toanswer are: What is the purpose of the brand in culture? What human problem is the brand solving? These answers willelevate the brand into a set of values or beliefs that should dictate how the brand behaves through programs or platforms.Inconsistency in this area is the most common shortfall among most loyalty programs, leading to sub-par performance andless-than-ideal contribution to brand equity.Beyond the few celebrated brand experience platforms such as Nike+, and Fiat Eco:Drive, there are a few examples ofbrands in more challenging categories (such as CPG) integrating their “think” and “do.” Frito-Lay offers one relevant casestudy via its “permissive indulgences” initiative.Rooted in the belief that snacking should make you feel good, not guilty, Frito-Lay invested significant resources in a widevariety of product-innovation and brand-experience platforms to support its women’s portfolio of brands that include Baked,SmartFood, Sun Chips, and Flat Earth. The combined effort goes all the way from actual products designed for women (e.g.100 calorie packs) to multi-channel brand expressions ultimately aggregated in the website awomansworld.com.The platform, Only in a Woman’s World, has all the ingredients of loyalty programs (registration, personalized email stream,community). However, unlike most loyalty programs it brings together these elements via a common theme betweencustomers and brands in a way that facilitates a lifestyle that delivers on the brand belief of feel-good snacking. 19
  • 20. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNFrito-Lay’s initiative also stands out in its ability to marry true entertainment with practical information and community. Iteffectively plays at the intersection of content, community, and commerce, driving true loyalty while contributing to brandequity. The wide success of this platform is multidimensional and goes well beyond site visits and into an active Facebookcommunity, earning a space in the top 10 viral videos of several charts, and a thriving following in Twitter. Most importantly,the brand now enjoys a community of active loyalists that share a common point of view and can fuel future initiatives.ZAPPOS: DELIVERING WOWZappos CEO Tony Hsieh sees customer service as an investment, not an expense. The return on investment – happycustomers spend more money on their future purchases, and give you free (earned) media by telling their friends how muchthey love you. Zappos didn’t make the choice to invest in service after crunching the ROI numbers; it’s a core belief that hasdriven the company since the beginning. They call it delivering WOW. SERVICE CULTURE Zappos is not a shoe company. In fact, they don’t really call themselves a retailer. They are so obsessed with pleasing customers that they call themselves a service company – that just happens to sell shoes, handbags, clothing, eyewear, accessories, and eventually much more. Zappos CEO Tony Hsieh states their “#1 objective is to establish a great company culture. If you do that, all the other stuff falls into place.” But Zappos’ success is not built on the culture alone. The other piece of the equation is how they manage relationships and their brand across all touchpoints to make sure that every customer interaction is one of quality and lives up to the brand’s values. These interactions can be the experience of purchasing on the site, trading tweets with Tony or other Zappos employees, calling into the call center, or following as a fan on Facebook. 20
  • 21. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGN IT STARTS WITH VALUES Zappos has 10 they live by: 1. Deliver WOW Through Service 2. Embrace and Drive Change 3. Create Fun and A Little Weirdness 4. Be Adventurous, Creative, and Open-Minded 5. Pursue Growth and Learning 6. Build Open and Honest Relationships With Communication 7. Build a Positive Team and Family Spirit 8. Do More With Less 9. Be Passionate and Determined 10. Be Humble LIVING THE VALUES At Zappos, customer-service employees dont use scripts and arent pressed to keep calls short. Every new hire spends four weeks as a customer-service rep and a week in the Kentucky warehouse before starting work. Then, about one week into the job, Zappos makes what it calls "The Offer," telling newbies, "If you quit today, we will pay you for the amount of time you have worked, plus a $2,000 bonus." In a BusinessWeek interview, Hsieh said only 2% to 3% of people take the offer. The other 97% say no deal — they choose the job over the instant cash. The result – a service staff that perpetuates the culture of customer obsession. TRANSPARENCY “I think people worry too much about bringing their personal selves into business, when I think the way to succeed in today’s world is to make your business more personal. Twitter is also a great way of doing that.” Tony Hsieh, CEO.Zappos features employee and brand tweetson subdomain twitter.zappos.com. There areover 400 Twitter employees whose updatesappear on this page. Sometimes they tweetabout Zappos, sometimes just aboutthemselves, their personal interests and lives.Their only guideline – use your best judgment.The result is that the tweets give you aglimpse of the culture and lives of the peoplewho work there. Not only does thistransparency help the Zappos culturepermeate out, but it’s important for buildingtrust. Trust is essential for building loyalty. 21
  • 22. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNWOW’ING WITH SERVICEZappos understands that a WOW experience with the brand can happen at any point, from browsing thesite to calling in about an issue with your order. Free shipping, a 365-day return policy, and a 24/7 callcenter are great, but there’s more that sets Zappos apart and has people talking, and coming back.WOW LEADS TO REPEAT PURCHASEOn any given day, 75% of purchases are from returning customers, and the average customer orders 2.5times over the course of 12 months. Not only are the customers coming back, the size of their basket isincreasing from $111.98, on their first purchase, to $143.22. WOW the customers and they’ll “come back,order more and order more often.”WOW LEADS TO WOMUntil very recently, Zappos didn’t advertise on TV. In fact, only15% of their advertising is spent offline. The remainder is spentonline. But what’s been critical to Zappos growth to a $1 billioncompany in 10 years is what they don’t pay for; it’s what they’veearned through word of mouth. Zappos doesn’t strive to delivergood service, they strive and deliver WOW service. And whenthey do, people tell others. Zappos shared customer acquisitionnumbers, which showed that 43% of new customers wereacquired through WOM. When you give people a reason to loveyou, it pays. 22
  • 23. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNRETAIL TRENDS //INTEGRATING BRAND “THINK” & “DO”!Modern loyalty programs are in reality comprehensivebrand experiences that bring to life the brand position orbeliefs via interactive features and services. Brands arenow finding ways to improve in-store engagements thatbring brand beliefs to life, connecting with consumers ona level deeper than the products themselves.!!!!STARBUCKS! METHOD!!!! 23
  • 24. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNSOCIALLY RESPONSIBLE STORE DESIGNIf a brand believes in sustainability, shouldn’t this belief be reflected in the stores themselves? Not only through efficient uses 35of energy and waste, but the elements used to build the stores. Starbucks Starbucks believes in doing “things that are good to each other and the planet. From the way we buy our coffee, to minimizing our environmental footprint, to being involved in local communities.” They have ethically sourced coffees. They take steps to reduce carbon footprints with 100% reusable or recyclable cups, and have sights aimed on 2015 to have recycling available at 100% of their stores. One of their most recent initiatives has been to apply these beliefs to store design and materials sourcing. Starbucks has concept shops in Seattle that are designed to be more energy efficient, and built from locally sourced and produced materials. The new design strategy will cost incremental dollars that would have otherwise been saved through the manufacturing economies of scale they’ve benefited from in the past.STORES AS BRAND FORUMSJust as brands create online experiences to engage with consumers through shared beliefs, store experiences can positionthe brand as more than just a product, and offer a positive impact on consumers’ daily lives. 34 Method Method sells natural cleaning products for “people against dirty.” They set up a pop-up shop in New York that was a physical manifestation of what the brand believes in. Experts offered advice on eco-cleaning. They hosted organic cocktail classes and eco-craft parties. They even had a confessional booth where guest, could cleanse themselves of ‘dirty cleaning secrets’ by writing their sin on a whiteboard and holding it up for a picture. Method encouraged people to bring in their toxic cleaning products and trade them in for a free Method product. The experiences and events were tied to beliefs and not always to the products themselves. 24
  • 26. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNIII. NURTURE ACTIVE LOYALISTS: MUCH MORE THAN SOCIAL MEDIA “Every day, millions of people make all kinds of voluntary contributions to companies – from informed opinions to computing resources – that create tremendous value for this firm’s customers and, subsequently, for their shareholders.” Scott Cook, Intuit founder, 29 board member P&G, eBay, AmazonAt RAPP, we have engaged and nurtured active loyalists in different industries as part of broader marketing efforts, and withexcellent results (e.g. propelled Travel Channel to the top of branded Facebook applications via a Social Gaming initiative,engaging a new audience, and driving more eyeballs than any other marketing tactics). In our experience, success in thisarea is driven partly by the marketer’s ability to create a coherent platform in which active loyalists have a clear role, andpartly by following two essential principles: 1. Activate database marketing with focus on collective action: Today’s communication environment facilitates immediate connectivity among the large majority of consumer. This drives the need to look at database marketing as a vehicle to identify advocates within social groups and become a catalyst for marketing that drives collective action. This will be further explained in the following section that explores new trends in database marketing. 2. Facilitate co-creativity: This goes well beyond co-creating advertising and expands into a fluid environment where active loyalists get a stake in the brand by contributing to improve the overall brand experience.As trust in formal communication channels continues to decrease, marketers must be able to identify key groups of loyalistsand offer them an opportunity to co-create the brand. This effectively gives engaged customers a stake in the brand and 1, 30therefore intrinsic motivation to participate in broad social initiatives.Forrester data suggests that trust in advertising and traditional marketing channels is decreasing. Only 22% of consumersdeclare to trust email communications that they signed up for, and less than 15% trust information from print and TV ads. Onthe other hand, trust in consumer reviews, friends, and family remains strong at over 50%. Ultimately, consumers eitherremain loyal to brands or try new brands depending on a combination of factors, of which personal experience and peer 2reviews get the lion’s share of influence.Activating brand loyalists and engendering consumer collaboration – consumers building brands – is one of the most excitingareas of new loyalty thinking. We argue it’s an essential principle in driving brand equity in today’s business landscape ontwo fronts: 1) it’s already happening – whether brands want to acknowledge it or not, and 2) more often than not – brands arealready benefiting from this effort. 26
  • 27. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNThink about getting your loyalists in a room and asking them what gets them excited about your product. What yourcustomers tell their friends about your product. Why they recommend your product. It sounds like a focus group – but intoday’s multi-channel/multi-touch communication environment, driving brand equity means partnering with consumers todevelop value-rich brand solutions.Specifically then, sharing control of the brand with loyalists – an acknowledgement of consumer voice – is an example of anew loyalty value proposition. Brand-consumer collaboration replaces traditional coupons as the vehicle for consumerinvolvement and activates loyalists to engage their peers in brand – and brand equity – building activity. 27
  • 28. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNNURTURE ACTIVE LOYALISTS VIA “OWNERSHIP MARKETING”Similar to My Starbucks Idea, Procter & Gamble’s Tide uses the multi-channel social networking platform Get Satisfaction tomatch company representatives with consumers and the ideas they share, to provide an example of a new loyalty valueproposition in action.Going beyond simple customer service, representatives champion the idea within the company and report on progress backto the consumer through the network. This process positions the consumer as the star, and at the same time builds equity forthe idea and the brand throughout the entire community. It’s a winning proposition that provides value for both consumer andbrand.To date, Tide has had over 350 ideas and topics discussed, with 25 company employees participating among the activeloyalists and passive participants.While Tide’s Facebook page numbers over 225,000 fans, Get Satisfaction delivers the deeper, emotional touchpointsloyalists need to activate passive participants into brand builders.Specifically, these brand-building loyalist efforts include: ! Supporting ‘lost products’ – consumers helping each other find the products with which they have an emotional attachment. ! Extending charitable brand ideas – such as introducing a “Loads of Help” toiletry companion package to accompany the brand’s popular “Loads of Hope” disaster-relief program. ! Sharing ideas for better products – as simple as introducing particular scents as they drive multi- channel brand-consumer involvement and further new loyalty relationship marketing.HUGO BOSS: COLLABORATING WITH LOYALISTS TO BUILD THE BRAND AND DRIVE EQUITYAnother Procter & Gamble brand that’s embraced the concept of activating loyalists is HUGO BOSS through its HUGOCreate international design contest, asking consumers to design the company’s bottles.HUGO Create delivers a textbook example of new loyalty relationship marketing, as a brand that’s entirely, completely, andpassionately collaborating with its consumers to impact its branding efforts.The ongoing contest, launched in February 2008, has received more than 20,000 entries from over 100 countries through 11previous rounds each coming with its own theme. The theme for the current round 12 centers on the brand’s HUGO Man15th anniversary.Aside the sheer volume of design entries, the brand has developed an entire marketing platform built around multi-dimensional consumer creativity. The platform features a virtual and real ‘Manhattan Gallery’ that is in fact a collection of 13out-of-home executions throughout the borough featuring various winners, a published book featuring the winners fromearlier rounds, and loyalist activity across the creative social platforms such Flickr and YouTube, in addition to Facebook andMySpace that has reached hundreds of thousands of potential customers.Fundamentally, the reason behind the HUGO Create success is that the idea sits squarely upon the brand DNA – creative,hip, cool, has an edge, ‘not your dad,’ as commented by spokesmodel Jonathan Rhys Meyer – and thus squarely connectswith its active loyalists.It’s an example of the brand investing its audience in terms of empowerment, with the audience returning the investment bydelivering both in terms of content and in terms of engagement. 28
  • 30. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNRETAIL TRENDS //NURTURING ACTIVE LOYALISTS!Brands are arming consumers with new tools forengagement and social interaction, creating deeperengagement and nurturing a more active loyaltythrough these shared experiences.!!!!!!!!!!!! THREADLESS NIVEA 30
  • 31. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNSOCIALLY-NETWORKED STORE EXPERIENCES The Coffee Groundz / Houston, Texas The Coffee Groundz became famous because its operations manager used Twitter to get to know his regular customers. He then received a request from one of them for a take-out order – reputedly the first financial transaction on Twitter. People now regularly order food and drinks from their desks and hold ‘Tweetups’ for over 100 people – a chance for customers to drink coffee and gossip with local people all via Twitter, while they ‘carry on working.’ This is a fascinating example of the virtual world reflecting the small, everyday social interactions in the ‘real world’ – the mimicking of doorstep gossip about the community in which you live. Shake Shack / New York Shake Shack in NY is known for great burgers, great shakes, and long lines. They’ve implemented a Shack Cam on their website so you can check the line from your desk, and use Twitter to provide reports on line lengths.!ONLINE BRANDS CREATING REAL-WORLD PRESENCEIn a time when brick-and-mortar brands are creating or relying more on their e-commerce presence, a number of brands borndigitally are creating a physical presence so they can interact personally with their loyal consumers, and reach newconsumers. Threadless Threadless is an online t-shirt company that crowdsources t-shirt designs from the online community. Visitors to the site are encouraged to rate designs, and those designs with high ratings have a chance to get printed and sold. Threadless opened 2 retail locations in Chicago catering to the artistic, open-source consumers who design and purchase their gear. Downstairs, winning t-shirt designs from the website are sold, and upstairs features an art gallery with work sourced from the local community.SOCIAL SCENESAs the social interaction and experience around the brand becomes more important in capturing consumers’ imaginations,many FMCG and product-oriented brands are investing in concepts that simulate and provide complementary servicesoutside the expected delivery. It’s not just about holding a party; it’s about providing beneficial, insightful content forconsumers that extends the relevance and reach of the product into social life. Nivea This temporary pop-up shop for beauty brand Nivea is being installed in city squares in key Italian cities to coincide with notable cultural events, including the Milan Furniture Fair, Torino World Design Capital and the Biennale of Architecture in Venice. The space features a concept shop and a spa that provides free hair, nail and facial treatments. A flexible, ribbed structure allows the shop to change shape in each location. For Milan’s Design Week, the domed construction featured furniture pieces from the fair. 31
  • 33. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNTRENDS IN DATABASE MARKETING: ACTIVATING AND MEASURING BRAND EXPERIENCESTHE RELATIONSHIP BETWEEN LOYALTY AND PROFIT MARGINSWhile the examples we’ve provided in the earlier sections describe brand experiences that build equity, database marketingis the discipline that brings into action the dynamic of transforming customer loyalty into revenue – highlighting the“relationship between customer loyalty and profit margins.”At RAPP, we argue the key to modern database marketing is to enable key brand experience and loyalty functions discussedin previous sections: 1. Drive fluid customer insights: Move from reporting and marginal optimization to include cultural and business insights that drive business. 2. Provide input to the brand experience design process: Translate cultural and business insights into meaningful experiences that add value. 3. Nurturing advocates: Identify key advocate communities and key social drivers to maximize engagement and advocacy value of active loyalists.ADDRESSING CUSTOMERS IN A NEW WAYWe address customers through a four-level, multi-stage segmentation process to identify key areas of customer knowledge.Data Levels: 1. Customer Lifetime Value: the present dollar value of future sales with a customer. This longer term metric tends to attribute more weight to maintaining strong customer relationships over short term sales; leading to a healthier overall business. Examples of relevant data points are Customer Purchase History, Discretionary Spending, and Lifestyle Behavior. 2. Brand Engagement: consumer response to brand-driven communications; multi-channel. Examples of relevant metrics are Campaign Response Data, Website Interaction Data, and Customer Satisfaction Measures. 3. Most Relevant Social Context: data elements surrounding the consumer’s relationship with the brand – that offer the most leverage in terms of impact. Examples of relevant metrics are Purpose of Purchase Data, Product Details, Location of Purchase, and Purchase Date. 4. Social Influence Score: a combination of an individual’s level of digital social connectivity, their willingness to create digital content, and the level of opinion leadership they possess among their peers. Examples of relevant metrics are Social Network Behavior Data, Content Sharing Behavior, Media Consumption, and Content Creation Behavior.THE NEW SEGMENTATION CONSTRUCT – STAGES 1 & 2Stage 1 is Macro Segmentation, and it is built to align large groups of consumers with major business objectives. Theprocess encompasses levels 1 and 2; Lifetime Value and Engagement.Stage 2 is Micro Social Segmentation which is nested within the Macro Segments to create more granular groups. It alsoemphasizes the growing role of social influence on consumer behavior. 33
  • 34. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNFigure 4: Lifetime Value Meets EngagementMACRO SEGMENTS THAT DRIVE THE BUSINESSFigure 4 provides an example of Stage 1 – Macro Segmentation, identifying customers by mapping their lifetime valueagainst their engagement values. “Elite At Risk” customers, for example, show a high lifetime value but low engagement,suggesting hard business objectives – such as attrition prevention - to which we can map prescriptive marketing initiatives.Additionally, “Passive Mainstream” customers showing low lifetime value and low engagement suggest a two-fold businessobjectives: 1) migrating these consumers up to higher lifetime value/engagement or 2) right-sizing the marketing investmentif migration proves difficult.All airline frequent flier programs, for instance, began with this type of segmentation. The airline companies were able toassess Lifetime Value and Engagement levels for program participants based on the number of tickets they purchased, thecost of the tickets, and their response rates to direct marketing efforts. Participants who hadn’t bought a ticket for more than6 months would receive a win back communication in the mail. 34
  • 35. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNBEYOND ATTUDINAL SEGMENTATIONStage 1 is designed to align consumers strictly with actionable business objectives. Many companies attempt to combineMacro Segmentation with an Attitudinal Segmentation, resulting in segments like “Elite Penny Pinchers.” This type ofsegmentation strategy makes the mistake of intermingling Business Objectives with Consumer attitudes, and the challengebecomes succinctly communicating the segmentation results to corporate executives.More often than not, the executive suite is concerned more with business objectives than with attitudes, so being in a positionwhere these two concepts cannot be separated becomes a liability.Additionally, attitudes are rarely consistent internationally, or even across large geographies like the United States. As aresult, there is significant difficulty when trying to expand an Attitudinal Segmentation scheme to a global, or evencontinental, footprint.Conversely, RAPP has seen that Context and Social Influence are textural layers that provide equivalent or improvedleverage over attitudes, but are more consistent globally. And current research, as demonstrated in the previous sections, isbeginning to suggest that innovative marketers are gaining brand affinity by having the vision to move into new social spacesand engage with the consumer – and let the consumer speak rather than attempt to mimic consumer attitudes.Coca-Cola’s My Coke Rewards program, for example, laid the foundation for identifying Social Influencers in the digitalspace through their can-design competition, and had the potential to go further. The program, which attracted 35,000 entries,did not capitalize on the opportunity to establish a continuous communications stream with this group of Social Influencers,but did offer the brand a chance to experiment and learn about digital social behavior.MICRO SEGMENTS: CATALYST FOR DEEP CUSTOMER ENGAGEMENTStage 2 – the Micro Social Segmentation – is designed to align strictly with the consumer, not business objectives, andenable relevant marketing communications. These segments are layered on top of the Macro Segments so that thebusiness objectives can be easily extracted from the consumer objectives.Stages 3 and 4 – Context and Social Influence – can be thought of as independent continuums. With Context, the moreinformation you have about a customer and their transactions with your brand the more context you can incorporate into yourmessaging.For instance, what and when did they purchase last? Do they own a small business? Does the consumer have children? Allof these questions have associated data points that provide critical layers of context. These data elements are captured overtime within your database, and hence over time more and more information is gathered about each consumer. The result isthat a continuum can be created from less context to more context. And importantly, these data points have continuityacross the globe. 35
  • 36. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNFigure 5: Micro Social SegmentationAdditionally, understanding a consumer’s level of social influence, as hinted at above, is a critical portion of this segmentationmethodology. It enables us to not only message effectively to customers but to also target effectively – and to select theappropriate channels with which to market to each customer. We think of social influence as being divided into four groupslinked to Forrester’s Social Technographics: 1) Spectators – individuals who passively engage in the digital ecosystem; no interacting with others digitally. 2) Connectors – individuals that interact with other in the digital ecosystem; sending and accepting invitations, messaging, etc. 3) Culture Setters – engaging actively with others within the context of cuttingedge digital properties. 4) Creators – creating significant digital content being consumed by groups 1, 2, and 3. Also engaged heavily with other Creators.Figure 5 shows that these groups exist along a continuum from the least socially engaged to the most. Consumers withineach of these groups need different communication styles through different means to truly connect with them. Creators andCulture Setters, for that matter, can actually become ambassadors for your brand if you truly connect with them. Engagingappropriately with these individuals can enable marketers to answer the question of “how can we leverage our database toextend beyond its own reach.” The “Innovate with Kraft” program is a great example of a marketer appealing to consumersfor ideas on innovation. 36
  • 37. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNDEPLOYMENT: ENABLING A NEW MARKETING CONSTRUCTDeploying this two-stage methodology may seem complex, but dynamic content delivery and channel and tactic optimizationprovide efficiency to the process.Context can be mapped to specific components of marketing collateral that can be dynamically inserted into digitalcommunications. For instance, a repository of images with business rules connected to them can determine what imagegets inserted when and in what communications. If a consumer is 35 and has two children, insert the picture of the family asthe backdrop in the creative rather than the middle-aged man driving a Corvette. Insert specific verbiage associated with aconsumer’s last purchase or, even better, associated with their next most likely purchase. This system creates a layer ofcontextual relevance within the communication that connects the consumer need-state to the brand and is easily enabledthrough dynamic technology.Channel/Tactic Optimization is then employed to enable Social Influencers. To do this, RAPP, and others, are employingsurveys designed to determine an individual’s level of Social Influence. We can then match consumers in the database withindividuals in each of the four social groups identified by the survey results that have similar brand history, demographics,and behaviors. This process enables us to map each individual in the database to a social group and then funnel them downa distinct communication path tailored to their group. 37
  • 38. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNFigure 6: Channel/Tactic OptimizationMEASURING SUCCESSThe measurement process is fairly straightforward with this two-stage segmentation methodology that clearly separatesbusiness objectives from the consumer context. Each Macro Segment is tied to business objectives inherently tied to KPIs;lifetime value and/or engagement. These metrics are tracked over time not only for each Macro Segment but also for eachMicro Segment.Through this, we determine overall program performance at the Macro level, but also dig deeper into each Micro Segment toidentify areas creating the largest lifts in our KPIs. By tracking KPIs in this fashion, and tracking campaign costs at the MicroSegment level, we are able to determine ROI for each Micro Segment and thereby make the most efficient businessdecisions in terms of marketing investment.Although this top-line metric can establish and prove program success, measurement as part of the mission of databasemarketing is to generate insight. All companies should be considering other metrics specific to their business that providerelevant perspective on the behavior of their customers and enable these insights. For instance, Net Promoter Score is anaggregated measure answering the simple question, “How likely would you be to recommend our company to a friend orcolleague?”Responses are measured on an 11-point scale, with the top two categories considered Brand Promoters, and the bottomseven considered Brand Detractors. Measuring NPS around segmentation can apply an additional level of data a companycan employ to sharpen both business objectives and successful marketing initiatives. 38
  • 39. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGNANNOTATED BIBLIOGRAPHY:1 Ryan, R.M. & Deci E.L. Intrinsic and Extrinsic Motivations: Classic Definitions and New Directions. University of Rochester, 1999. As adults – extrinsic rewards/motivations lead – in terms of action – simply because of responsibilities and such, but within the extrinsic motivations – increasing the level of autonomy drives a higher level of acceptance/interest/engagement with the task. So, that supports a platform experience for instance which includes a community feature, a ratings feature, etc – giving the user a role (and a value) in the delivery of the message. Intrinsically motivated behaviors – which take place more often in childhood/youth “are performed out of interest and satisfy the innate psychological needs for competence and autonomy are the prototype of self-determined behavior.” “more autonomous extrinsic motivation is associated with greater engagement,..greater psychological well-being, among other outcomes.” Adding elements - such as autonomy, competence and relatedness - which help drive the rationale (or composition) behind extrinsic motivations towards the value behind intrinsic motivational “appears, then, to yield manifold adaptive advantages, including more behavioral effectiveness (due to lessened conflict and greater access to personal resources) and greater experienced well-being.” Further, conditions that drive towards intrinsic motivation which yields ‘high-quality’ function “allow satisfaction of these three basic human needs – that is that support the innate needs to feel connected, effective, and agentic.”2 Bradner, L. Building Lasting Customer Loyalty. Forrester Research, 2007. Customer loyalty is hard to earn and harder to keep. Many loyalty initiatives fail to build real loyalty — or worse, they subsidize behavior that would have happened anyway. Forrester’s strategic framework and loyalty self-test can help marketing leaders identify the elements that create meaningful loyalty, the key tactics that drive it, and the mix of tactics that are best for their business. Four major loyalty marketing tactics deliver unique levels of customer intimacy and brand engagement: price loyalty, experience loyalty, programmatic loyalty, and relationship loyalty. The real power often comes from leveraging multiple tactics together in order to build loyalty at all levels.3 Bradner, L. Social Loyalty. Forrester Research, 2008. Marketers need engagement to create long-lasting brand relationships, but how should they try to create these — and with whom? Traditionally, loyalty programs have provided transactional interactions with customers. But marketers who embrace social loyalty — brand affinity built on the connection of consumers to the brand as well as to each other — can use it to move their loyalty programs from mercenary rewards to a portal for identifying, creating, and nurturing high-value customers.4 Chu, W., and Geller, S. Customer Experience and Loyalty: A Closer Look. Forrester Research, 2009. Forrester examined the correlation between customer experience and loyalty across 12 industries: airlines, banks, cell phone service providers, credit card providers, hotels, insurance firms, Internet service providers, investment firms, medical insurance companies, PC manufacturers, retailers, and TV service providers. Our analysis looked at how three elements of customer experience (meeting needs, being easy to work with, and enjoyability) correlate with three components of loyalty (repurchase plans, reluctance to switch, and likelihood to recommend). We found that meeting customer needs links the most with repurchasing and enjoyability links the most with the likelihood to recommend. It also turns out that industries have different loyalty profiles. For instance, retailers and health insurers can influence loyalty the most by meeting customer needs while banks and hotels can affect customer repurchase plans from all elements of customer experience.5Tempkin, B.D. Customer Experience Correlates to Loyalty. Forrester Research, 2009. Using data from nearly 4,700 consumer surveys, Forrester examined the correlation between the customer experiences delivered by more than 100 US firms and the loyalty of their customers. Our analysis shows that good customer experience correlates to consumers’ willingness to repurchase, reluctance to switch, and likelihood to recommend firms across all 12 industries we examined. Office Depot has the highest correlation between customer experience and repurchase plans while US Airways has the highest correlation between customer experience and reluctance to switch. When we compared the data with our analysis from last year, the correlation between customer experience and loyalty increased in every industry. Given the stronger connection between customer experience and loyalty, customer experience professionals will need to keep their companies focused on customers. 39
  • 40. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGN6 Kemp, M.B, and Kim, P. The Connected Agency. Forrester Research, 2008. Consumers have replaced trust in advertising with trust in individuals — in particular, friends, family, and colleagues. Turning to communities and away from mass media, consumers will increasingly ignore messages, insist on involvement and resonance, maintain control over their privacy, and prefer peers’ endorsements. Today’s agencies fail to help marketers engage with consumers, who, as a result, are becoming less brand-loyal and more trusting of each other. To turn the tide, marketers will move to the Connected Agency — one that shifts: from making messages to nurturing consumer connections; from delivering push to creating pull interactions; and from orchestrating campaigns to facilitating conversations. Over the next five years, traditional agencies will make this shift; they will start by connecting with consumer communities and will eventually become an integral part of them.7 Rousseau-Anderson, J. Technographics Survey Highlights: Shopping Habits of Loyalty Program Subscribers. Forrester Research, 2009. Answers the following questions: Why do US online buyers subscribe to loyalty programs? How do loyalty program subscribers and nonsubscribers differ in their shopping habits and online retail-related social behaviors? How are loyalty program subscribers and nonsubscribers changing their spending habits as a result of US economic conditions?8 Mancini, M. Segmentation and Customer Loyalty. Nielsen, 2009 In a down economy, price sensitivity can trump loyalty. To strengthen the bonds with these high-profit potential customers, innovative companies are deploying enterprise-wide strategies built on consumer segmentation. These strategies go beyond the classic marketing applications of segmentation to drive customer-facing aspects of a business.P&G Beinggirl9 Bradner, L. Case Study: P&G’s BeingGirl.com Builds Lasting Brand Loyalty. Forrester Research, 2007. Procter & Gamble (P&G) wanted to build an online destination for teen girls seeking information related to feminine care. The site it built, BeingGirl.com, provides health content, product information, and teen community in a safe, entertaining environment. By investing in content, offline marketing of the site, and strategic partnerships, P&G has created a successful teen destination that drives not only visits and engagement, but also sales.A Woman’s World – by Frito-Lay10 Miley M., Mack A, The Rise of the Real Mom Advertising Age, 2009. Frito Lays came up with “permissible indulgences” – ‘products that could bring a woman satisfaction with any accompanying guilt – as the company was seeing women responsible for the buying the bulk of salty snack purchases for their family but not consuming the products themselves – “despite their high levels of stress and the depressing impact of the recession, which one might think would make them more apt to snack.” “Frito Lay provided women with equivalent bit-size ‘permissible indulgences’ in the entertainment realm by also building a website with short, animated webisodes at awomansworld.com” Frito Lay brand manager Marissa Jarrett said women recognize “the need to take time for (themselves) to be a better wife, friend, spouse, mother, worker. What we’re trying to do is be a part of her life in those moments.” The women’s portfolio includes the Baked products, 100-calorie packs – products lower in fat and calories and packaged in ‘more-subdued matte colors.’ “She’s looking for a product to start a conversation with her, not yelling at her. Our other products were screaming out like a teenage boy.” Also Support – for platform strategy that offers more personalization/customization – relevance. “Smart businesses recognize that cookie-cuttter approaches don’t work,” said Jan Combopiano, VP-Chief Knowledge Officer, Catalyst. Gina Garrubbo, BlogHer VP said, “There’s this sort of backlash and anger that women have to marketers. What they’re saying: ‘Don’t tell us what we think; don’t tell us who we are.’” Aliza Freud, CEO of SheSpeaks, a NY-based WOM network for women, found 90% of women say advertisers don’t advertise to them. Lauren Zalaznick, president, NBCUniversal, said, “A lot of people say they listen to women. Very few people actually do.” 40
  • 41. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGN The multitasking tendencies of today’s moms extend to their media consumption, and as a result it’s getting close to impossible to grab their truly undivided attention. A chief task is to present them with relevant content that fits into their lives. “It doesn’t matter if they’re coming home at 7:05pm or starting to cook dinner at 5:45pm, their minds say, ‘Please don’t waste my time; please respect me,’” said Zalaznick. For NBCU, part of being respectful and relevant is creating network programming that is relatable and entertaining, and part of it is embracing viewers’ lifestyles. Increasingly, women augment their media consumption with content from their peers – in person, on blogs, Facebook, Twitter, etc. “They want to be heard, they want to be acknowledged,” said Garrubbo. Brief articles notes detailing the success of the program, including comments 11. Bradner, L. Defining a CPG Web Site Strategy: Marketers Leaders Must Define Web Site’s Role in Each Brand’s Marketing Mix. Forrester Research, 2009. CPG Web Sites continue to be a mecca for consumers searching for coupons and deals – and in today’s economy, those activities are likely to be more popular than ever. However, many CPG Web sites can – and should – do more than provide cents off…the trick is to prioritize investment across a portfolio of sites by defining which sites should be a brand’s digital hub and which brands may not need a site at all.12 Elkin, T. CPG Mobile Couponing. eMarketer, 2009. Paper and electronic coupons delivered via newspaper circulars, freestanding inserts (FSIs), direct mail, e-mail and Websites represent the vast majority of coupons used. However, coupons sent directly to mobile devices are the next big opportunity for CPG brands seeking to drive incremental sales and ensure loyalty.13 Katz, J.M. Why Consumers Subscribe to CPG Emails: Understand How to Find New Email Subscribers and Keep Their Interest. Forrester Research, 2009. Email is a great channel for consumer products manufacturers to spread the word about their products, especially to consumers motivated by family and cost-savings. CPG email subscribers are real fans of the brand, motivated by family, and extra cost-conscious in a down economy. Email marketers should capitalize on the social influence of these devotees/tailor messages to consumers’ specific preferences and provide savings tools within messages.14 Overby, C.S. CPG Sites That Deliver Brand and User Value: How Brand Factors Influence a Site’s Consumer and Business Goals. Forrester Research, 2006. Consumer expectations vary across consumer packaged goods Web sites, often based on the consumer relationship and history with the brand in other channels. As such, CPG marketers should analyze several brand and category factors to help identify user goals and the business benefits of supporting certain goals on brand sites.15 Phillips, L.E. CPG Online: Health and Beauty Go Interactive. eMarketer, 2007. As part of the consumer packaged goods category, health and beauty marketers have been wary of the internet. Low Price used to equal low online sales and involvement from consumers, or so these marketers thought. Today, consumer behavior – particularly online search and shopping – is driving marketers to take a new look at how the internet fits into their advertising budgets.16 Phillips, L.E. CPG Online: Food and Beverages Party On. eMarketer, 2007. The food and beverage category leads the US consumer packaged goods industry in online advertising, putting 2.1% of its total $8.7 billion advertising spending online in 2006. Food and beverage advertisers cut advertising spending in every major media in 2006 except the internet.17 Tempkin, B.D. How Consumers Research, Buy, and Get Service. Forrester Research, 2008. Forrester asked consumers about the channels they use when researching, buying, and getting customer service. In- person interactions, both phone and store, dominated these activities. But consumers were not very satisfied with most interactions. Our research also’ looked at channel preferences across generations. No surprise: Older consumers prefer to research in a store while younger consumers prefer the Web. It turns out, however, that Gen X showed the most preferences for buying online. 41
  • 42. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGN18 Temkin, B.D., and Popoff-Walker, R. The Gen Y Design Guide: Crafting Experiences to Meet the Unique Needs of Younger Consumers. Forrester Research, 2007. Gen Y consumers are a unique breed. More than any other generation, Gen Yers are connected to technology for communications and entertainment and they spend considerably more time interacting with digital media — like using PCs, going on the Internet, watching DVDs, playing video games, and using their mobile phones. Young adults, merely by their age, are social beings and influenced by their peers and most likely to rely on recommendations from friends or family. To overcome Generation Y’s fickle attention and broad use of media, firms need to hook Gen Yers in by quickly exposing value and then keeping them interested over time. Because Gen Yers are so influenced by peers and their own communication style, firms need to speak to them authentically and on their level. Diverse and expressive, Generation Yers respond to experiences that allow them to personalize and customize their interactions. Since Gen Y consumers are very social, firms should consider enabling them to communicate and express themselves.19 Tempkin, B.D. The Voice of the Consumer: The Next Generation. Forrester Research, 2009. Voice of the customer (VoC) programs are a critical component to improving customer experience. But todays efforts are broken in many ways. They lack action, get caught in silos, and arent cost- or time-effective. But a number of trends are changing how companies implement their VoC programs, including analysis of unstructured and unsolicited data, inclusion of social media, and more continuous feedback. Companies should take advantage of these trends to dramatically improve their use of customer feedback. The result: better customer experiences and more loyal customers.20 Williamson, D.A. CPGs and Social Media: Much More Than Advertising. eMarketer, 2009. Consumer packaged goods companies and social media are not an easy mix. CPGs have legacy marketing techniques that focus on reaching mass audiences and the ways they measure marketing and sales success simply do not mesh with the types of measurements that social media offer. This apparent disconnect may actually be an opportunity for CPG companies. By looking at social media as a way to listen to consumers, respond to their needs, and create ongoing dialogue.21 Williamson, D.A. CPGs and Social Media: Much More Than Advertising. eMarketer, 2009. (PowerPoint) Building a fan base with a coupon or discount is a short-term promotion. Social media is a long-term opportunity. CPGs will be challenged to measure social media’s impact on sales. But imperfect metrics are better than none at all. Social media marketing is about being open to feedback rather than getting people to spread your message.TGIFridays – collaborative consumer campaign22 TGI Friday’s reports loyalty scheme’s success. Thewisemarketer.com, 11.3.08. Program: ‘Give Me More Stripes’ Members receive a free appetizer or dessert (up to $8US value) on signing up, a one-time ‘jump-the-line pass, $8US certificate for every $100 spent (excluding alcohol, exclusive communication re: specials and menu previews, complimentary chips & dip, or hummus & chips, free snack bag during lunch. Results: net of over 500K members “We struck a nerve with the consumer by offering a value proposition and an enhanced in-restaurant experience,” said Andrew Jordan, SVP Marketing TGI Friday’s USA Harris Interactive survey shows 87% of US adults “would find membership in a restaurant recognition or rewards programme appealing.” And of those respondents ,79% “would find complimentary food or drink an appealing feature” in a restaurant reward program.Ikea – Facebook tagging keys value exchange - promotion23 Warren C. Facebook Marketing: IKEA’s Genius Use of Photo Tagging, Mashable. 2009. 42
  • 43. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGN IKEA’s recent Facebook campaign is “awesome.” The Swedish furniture company opened a new store in Malmo, Sweden, and rather than spread the word the old-fashioned way, they decided to go directly to the people using Facebook. An account was created for the store manager at the Malmo store. Over a two-week period, showroom images were uploaded to his Facebook photo album. Using the all-popular “tagging” feature, customers were able to locate items in the pictures and put their name on it. The first person to tag an object got to take it home. The word spread through Facebook and users started embedding links and images in their own profiles and across news feeds. In turn, thousands and thousands of users willingly promoted IKEA and its new store to others, creating a big win for IKEA.24 Neff, J. P&G Taking Its Marketing Back to the Store. Advertising Age, 2009. If it doesnt work at the store, its no longer a good marketing idea for Procter & Gamble Co., which increasingly is driving home this concept, known as "store back," with all its agencies, not just its so-called shopper-marketing shops.25 Brat, I. A Jar of Vegemite, a Window on Kraft. Wall Street Journal, Sept. 30, 2009. Kraft Foods Management Australia developed a new form of Vegemite to match the changing tastes of its consumers. Kraft managers worked with consumers on the product’s formulation.26 Foley, M. Vegemite Contest Draws Protests. New York Times, Nov. 2, 2009. Kraft Foods Australia held a contest to name a product extension of the Vegemite brand receiving almost 50,000 entries. The first consumer-sponsor name selected ‘iSnack 2.0’ raised thousands of protest responses to which the company adjusted course, and renamed the product ‘Cheesybite.’ “Kraft has turned a fairly pedestrian product launch into a matter of public pride and public ownership and affinity for the Vegemite brand,” Mr. McCusker said. “That’s what today’s media thrives on: the conversations, the open expression of opinions, the love, the hate, the passion — and we’re talking about a jar of spread.”27 Court, D. Elzinga, D. Mulder, S. and Jørgen Vetvik, O. The Consumer Decision Journey. McKinsey QuarterlyNumber 3, 2009. Consumers are moving outside the purchasing funnel—changing the way they research and buy products. If marketing has one goal, it’s to reach consumers at the moments that most influence their decisions. Marketing has always sought those moments, or touch points, when consumers are open to influence. Today, the funnel concept fails to capture all the touch points and key buying factors resulting from the explosion of product choices and digital channels, coupled with the emergence of an increasingly discerning, well-informed consumer. A more sophisticated approach is required to help marketers navigate this environment, which is less linear and more complicated than the funnel suggests. We call this approach the consumer decision journey. Our thinking is applicable to any geographic market that has different kinds of media, Internet access, and wide product choice, including big cities in emerging markets such as China and India. We developed this approach by examining the purchase decisions of almost 20,000 consumers across five industries and three continents. Our research showed that the proliferation of media and products requires marketers to find new ways to get their brands included in the initial-consideration set that consumers develop as they begin their decision journey. We also found that because of the shift away from one-way communication—from marketers to consumers— toward a two- way conversation, marketers need a more systematic way to satisfy customer demands and manage word-of-mouth. In addition, the research identified two different types of customer loyalty, challenging companies to reinvigorate their loyalty programs and the way they manage the customer experience.28 Stelter, B. Web-TV Divide Is Back in Focus With NBC Sale, New York Times, Dec. 3, 2009. As Comcast’s purchase of NBC begins to take shape, a rising question/concern in the landscape of television viewing is how to better incorporate into the business model the viewers who are consuming programming through the Internet through sites like Hulu.com and Fancast.com. The sites illustrate the influence of the Internet on evolution of entertainment consumption. 43
  • 44. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGN29 Cook, S. The Contribution Revolution: Letting Volunteers Build Your Busines,. Harvard Business Review,2008. The users can be customers, employees, sales prospects—or even people with no previous connection to the company. Their contributions can be active (work, expertise, or information) or passive and even unknowing (behavioral data that is gathered automatically during a transaction or an activity). The system is the method, usually internet-based, by which contributions are aggregated and automatically converted into something useful to others. Although the company retains control of the system and may choose to modify its design, the system converts inputs into useful outputs in real time with little or no intervention by the company. Such a system creates value for a business as a consequence of the value it delivers to users—personalized purchase recommendations, connections between buyers and sellers of hard-to-find items, new personal or business relationships, lower prices, membership in a community, entertainment, information of all kinds. In a world where companies succeed on word of mouth, where marketing and advertising are largely ignored, and where customers (90%) actively seek out recommendations from people like then, tapping into contributors (influentials) should be THE priority, especially during difficult times. It’s no longer a nice to have.30 Wipperfurth, A. Brand Hijack, 2006. Successful brands today – and nimble challenger brands - are those that increasingly listen to the consumer, and further, are changing the business and marketing paradigm by offering and encouraging consumers to participate in the growth of the brand – through product innovation, and marketing programming and execution.31 Butcher, D. P&G’s Tide Interacts with Consumers Via Mobile. MobileMarketer, Nov. 13, 2009. Tide brand has launched a mobile stain removal application called Stain Brain using the social-networking platform Get Satisfaction to enable and allow consumers to contribute their own stain solutions, rate others stain remedies and share feedback with the community.32 Rothman, S. Get Satisfaction’s Company-Customer Pact Augurs a New Age in Customer Relations, SocialMedia Soapbox, Aug. 23, 2009. Get Satisfaction is an online community that provides a place for consumers to come together and share information, tips and advice about companies, products and services. They can comment, rant, rave, ask and answer questions, suggest ideas and even have conversations with employees of companies that are sufficiently web 2.0-savvy to recognize the benefits of this new way of interacting with the people who, ultimately, pay their salaries. So this isn’t only a consumer community. Companies, too, are encouraged to join the conversations. One of the most inspiring things on Get Satisfaction is their Company-Customer Pact. Fundamentally, it’s a set of guidelines for how companies and customers can best engage with each other for the mutual benefit of both. It reflects the new realities of a web 2.0-interconnected world that rewards transparency and the guts to really listen and respond to customers online, in a dialogue that is visible to all. What’s also pretty cool is that the pact doesn’t place the whole burden of the relationship exclusively on the shoulders of the marketer. Consumers also need to listen and be open to the point- of-view of the company.33 HUGO Create: HUGO Man 15th Anniversary. Dexigner, Nov. 10, 2009. 2010 marks the 15th anniversary of the HUGO Man Fragrance. Over the years, the HUGO Man Bottle has achieved iconic status since its creation in 1995. To commemorate the milestone, HUGO Fragrances is inviting designers, illustrators and photographers to participate in a special edition of the HUGO Create contest – reflecting on impressions and the emotional connections with the HUGO Man bottle. 44
  • 45. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGN34 HUGO Create - A New Creative Challenge Man 15th Anniversary. DesignDiary, Feb. 8, 2008. HUGO Create is a new and innovative competition for creative people from all-over the world. The design contest will act as a spotlight for creative talents, offering the chance to get published, as well as win financial prizes. HUGO Create is a celebration of visual creativity open to ‘creative people’ of all skill levels. Professionals, students or design-enthusiasts.35 Ricoux, E. Collaborative Commons. Quarterly Trend Briefing, Contagious Magazine, 2009. In a digitally empowered global economy, social networking, blogging and the open source culture impose a greater level of interaction, responsibility and transparency upon the relationship between brands and consumers. Beyond bringing people together around common interests and values, online collaborations and the new ‘social web’ championed by sites like Twitter, Facebook and Jaiku are also prompting retail brands to rethink the role and nature of the physical spaces they create to captivate their customers.36 Judge, D. Social Climbing. Quarterly Trend Briefing, Contagious Magazine, 2009. Corporate Social Responsibility and the growth of social networking sites – two enormous trends that up to now have often been sidelined by retailers. But not for much longer. Although truly sustainable retail design and multinational store roll-outs have not traditionally been the comfiest of bedfellows, an army of increasingly discerning and ethically conscious consumers means that retailers – and their designers – need to get real about the impact their sores have on the planet. Social networking sites could also prove a huge opportunity for retailers, anxious to create online chatter around real world in-store experiences. Not only are they an environmentally friendly way of communicating consistently with consumers across the globe, but they’re also a channel for brands to get involved in everyday conversations.37 Jones, J. Digital Shopping. Quarterly Trend Briefing, Contagious Magazine, 2009. Mass consumerism rose to new heights in the last two decades and brands have responded by offering customers more personalization, customization and, above all, choice. Supermarket aisles have grown the length of football fields, each dedicated to single items like fresh produce. Electronic stores overflowed with products, clothing stores catered to every body type with fits from skinny to slim, casual, regular, athletic, and baggy. This explosion of products left consumers with choice fatigue, frustration and dissatisfaction. As in-store shopping ceased to be the pleasurable escape it once was, people turned to the internet — where user reviews, price comparisons, and freedom from crowds and checkout lines alleviated the stress. Determined to woo shoppers back, retailers are turning to technology to revolutionize the in-store experience.38 Johnston, L. Open Forum. Quarterly Trend Briefing, Contagious Magazine, 2009. Brand activities in the real world reflect online social habits, and also play a complementary role – acting as an antidote to the hive of activity in the digital world. We are seeing a huge increase in the nurturing of physical ventures that center around society and an appreciation of human knowledge, skills and talents. These moves signal a fruitful future for those brands that extend gestures of greater value and take on a stronger position of thought leadership in the broader social life story. 45
  • 46. RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGN! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! RAPP 437 Madison Avenue New York, NY 10022 Tel: 212-817-6800 www.rapp.com 46