Success with Social Loyaltyby Brett HannathTIBCO Loyalty Lab
2 S U C C E S S W I T H S O C I A L L O YA LT Y TABLE OF CONTENTS 1 THE MEDIA REVOLUTION ........................................................... 3 2 GOING SOCIAL ............................................................................ 5 3 FACEBOOK STEPS TOWARDS INTERACTION..........................................5 BEYOND LIKES ......................................................................6 5 TWITTER .........................................................................................9 6 THE REWARD .................................................................................9
3 S U C C E S S W I T H S O C I A L L O YA LT Y There’s no doubt that social media have become an important part of today’s total marketing mix, not to mention the daily lives of more than half the adults living on the planet. For this reason, it’s no surprise that social loyalty has been declared “The Answer” for loyalty program managers trying to boost sales for everything from high-end travel packages to soft drinks. The fact is, there’s often a lot of pressure from upper management to jump onto the social loyalty bandwagon. Before doing so, however, it’s important to ask: If social loyalty is The Answer, what is “The Question?” This is really just another way of stating the basic business principle that programs worth executing should have a clear rationale behind them. With this in mind, The Question becomes, Why social loyalty? Why do companies even need to think about it? The Media Revolution To start, consumer eyeballs are increasingly focused on the devices where social loyalty programs live. The decline of print media is the most dramatic example. In 2008, consumers spent twice as much time reading newspapers and magazines as they did viewing content on mobile devices. By 2011, the situation was reversed and they were spending 48 percent more time on their mobile devices. This decline in the popularity of print is mirrored by the precipitous decline in newspaper ad revenue, which fell from $60 billion in the late ‘nineties to $20 billion in 2011. Television viewing is also down in the critical 18-48 demographic. From the networks’ perspective, recent statistics are dismal. In the four weeks starting March 19, 2012, NBC lost an average of 59,000 viewers (roughly 3 percent) compared to the same period in 2011. CBS lost 239,000 viewers (8 percent). ABC lost 681,000 (21 percent) and Fox lost 709,000 (20 percent). Another “medium” important to loyalty marketers, the government postal service, is also in decline. In the U.S., mail volume dropped 16 percent in the period between 2008 and 2011. Post offices nationwide have been scheduled for closure, reducing both efficiency and reliability in terms of timing. European mail volumes were down roughly 9 percent during the same time period. The volume handled by the Hong Kong postal service – typical of the Asia Pacific region - also declined 9 percent. The declining popularity of “snail mail” makes this vehicle an increasingly unattractive delivery system for loyalty marketing campaigns. In contrast, online media are up. YouTube is one of the most striking examples. According to the company’s own statistics, 4 billion hours of video are watched
4 S U C C E S S W I T H S O C I A L L O YA LT Y on YouTube every month, and 72 new hours are uploaded every minute. In 2011, YouTube had more than 1 trillion views, which amounts to roughly 140 views for every person on the planet. Social media have become the dominant online force. Sixty-two percent of adults worldwide are now involved in social media sites such Facebook, Twitter, and the numerous other niche sites that are emerging almost on a weekly basis. In fact, social media use comprises 22 percent of all online time, making it the most popular online activity of all. Even the grandfather of online communication, email is still going strong in spite of usage declines in the younger demographic. According to a new international poll conducted by Ipsos Global Public Affairs on behalf of Reuters, some 85 percent of all Internet users around the world use e-mail for communication. A separate Ipsos poll indicates that, in spite of all the hype in the retail world about the importance of mobile smart phones, 75% of consumers still prefer to receive offers via e-mail rather than by text message. The take-away here is that media whose capabilities are limited to one-way communication are in decline, while those that enable two-way communication are rising. This is good news for loyalty marketers, because it’s two-way communication that enables the interaction and engagement at the heart of all successful loyalty programs. For companies seeking to move their customers from mere buyers to loyalty program members to brand advocates, the opportunities have never been greater. Before discussing these opportunities in more detail, however, a word of caution is in order. For all their potential, social media initiatives aren’t a panacea, and they don’t always succeed. A prime example of the pitfalls companies may encounter in the emerging social media arena is News Corp’s The Daily, an iPad-only publication intended to lead the way into a new era of digital journalism with a strong focus on social interaction. At this writing (eight months after launch) the publication has only signed up 80,000 paying subscribers, far short of its half-million subscriber goal, and recently laid off almost 30 percent of its staff. While there may be disputes as to why this particular venture is failing, the important take-away is that well-funded social media efforts can and do fail on a regular basis. In other words, there is no guaranteed path to success, a fact which makes having well-defined objectives and carefully thought-out plans even more important. In addition, companies need to take into account that there definitely is a learning curve.
5 S U C C E S S W I T H S O C I A L L O YA LT Y Going Social Loyalty programs based on social media encompass a broad range of tactics. Just as with conventional print, broadcast and direct mail, these tactics have strengths and weaknesses, and can often be best used in combination. There is no one- size-fits-all approach to creating social loyalty programs. Rather, there are multiple approaches that must be explored to determine which is best for a particular business situation. One of the easiest and most well-established approaches to social loyalty marketing is frequently not even included amongst the list of social media options: e-mail. Eighty-five percent of the online population is using e-mail as a communication mode, which means that the vast majority of any target audience is using it. E-mail technology is simple, well-understood, and integrated into countless other ancillary enterprise applications related to marketing. E-mail has the same one-to-many capabilities as Twitter (without the 140-character limit), and can be forwarded by recipients to their friends. In other words, e-mail shouldn’t be overlooked or abandoned as a component to loyalty programs in the era of social media. The caveat for e-mail is that it is definitely losing ground at the lower end of the age spectrum, with a 31 percent drop-off in the 12-17 demographic and a 34 percent drop-off in the 18-24 segment. Facebook Steps Towards Interaction Facebook is of course the gate to a much larger audience than any e-mail list could possibly provide, and one that can be targeted with unprecedented precision. But all too many companies have made the mistake of treating Facebook as yet another one-way broadcast medium. The typical approach is as follows: • Create a Facebook page. • Try to get people to “like” it (e.g. with thumbs up “Like Us on Facebook” signs in retail outlets). • Post offers on the news streams of the “likers” as often as possible without annoying them. This approach takes a narrow view of what the process of “liking” can mean, reinforces the social-media-as-broadcast-media approach, and greatly limits the
6 S U C C E S S W I T H S O C I A L L O YA LT Y possibilities for interaction in the very medium that was most specifically created to promote interaction. There are in fact three modes of “liking”: Like the brand. This is currently the most common, but the most limiting approach. Its major problem is that once a consumer has “liked” a brand, interaction comes to an end. Companies that have been “liked” may obtain access to a customer’s news stream – not a small benefit – but one single “like” is hardly the beginning of a dialog. Also, a simple “like” provides very little information about exactly what is being liked and why. Like a specific program. The major advantage of this approach is its potential for freshness. New product launches, seasonal programs and programs connected with specific events (e.g. sporting events or holidays) all offer opportunities for new “likes.” In fact, this approach does offer the possibility of initiating a dialog with customers. It also enables companies to more accurately target those customers when posting conventional offers to their news streams. Like a specific product. Just as with program-oriented “likes”, product- oriented “likes” enable multiple interactions. Beyond Likes Jane Smith Moving beyond the basic mechanics of asking to be liked is a whole new game for most companies, one in which both the players and the rules are subject to constant and unpredictable change. In our experience at TIBCO Loyalty Lab, however, the basic principles for success can be described by an equation with three components: innovation, interaction and integration. Below are some examples of what these terms mean in actual practice. Innovation Traditional loyalty programs are governed by the simple arithmetic of points-for- purchase. Although some programs have attractive ancillary benefits, such as shorter lines at the airport or faster access to a live human being in the call center, at bottom they simply reward repeat purchases with what amounts to a discount. The fundamental innovation of social loyalty programs is that they not only reward sales transaction, but also behaviors that are likely to lead to sales transactions. In addition, they make overt attempts to create a sense of community which can lead to loyalty over time, and ultimately a higher lifetime value per member.
7 S U C C E S S W I T H S O C I A L L O YA LT Y Nine Loves, the social loyalty program of shoe and handbag retailer Nine West, is a good example. In addition to receiving points for purchases, customers also receive points simply for liking the Nine Loves program page, and even more points for filling out a brief multiple-choice questionnaire. Besides rewarding customers for providing access to their news stream and information about their buying patterns, Nine Loves has other features that encourage a sense of community. For example, there is a “Shoe Confessions” feature that encourages Nine West customers to share humorous anecdotes related to their love of shoes. As smart phone location technology evolves, the concept of points for behavior can be used to influence shoppers while they are in the mall. Several major retailers now offer points to customers simply for walking into an outlet, and even more points for visiting specific displays. (Proof-of-visit is typically established via QR codes on the targeted display.) It’s important to note that rewarding activities other than sales transactions involves new back-end technology capable of taking the rewards structures beyond the points-for-purchase level. Fortunately, proven technology now exists to enable companies to reward almost any activity with points. Interaction The innovation component of the social loyalty equation involves cleverness, a new way of looking at how points are awarded, and the underlying technical capability to reward non-financial transactions. The interaction component goes farther by creating social mechanisms that enable friends to enhance their own relationships with one another while at the same time increasing the visibility of the brand. The 1-800-Flowers Gimme Love program is a good example. Gimme Love is based on a Facebook app that enables members to send a virtual gift: an image of a floral bouquet with a brief greeting not unlike a simple e-card. This app also allows members to send an actual bouquet, but whether the “love” is virtual or part of the physical world, the member earns points. What’s particularly powerful about this app is its viral potential. Recipients who have not downloaded the app must do so in order to receive their gift. They are then in the position to send virtual (or real) flowers to their circle of friends. There are many other examples of social loyalty programs that leverage members’ existing social graphs by offering them points when they enroll their friends in online activities such as games that revolve around a product or brand.
8 S U C C E S S W I T H S O C I A L L O YA LT Y Integration As with conventional media, social media are often more effective when used in combination. The Green Giant Fresh promotion is an example of how the integration of in-store and online engagement can deliver concrete results. The ultimate aim of the program was simply to sell more vegetables. Customers initially engaged by buying vegetables with on-pack labels at selected Target stores. The labels carried a unique code which customers could use to enroll in the program (using their Facebook credentials or via e-mail) and thereby obtain Free Farm Cash in Farmville, the enormously popular Facebook game based on virtual farming. This loyalty program played on both statistics and psychology to succeed. Green Giant Fresh could easily determine the potential universe for its products using available store sales data. Because of Farmville’s popularity at the time, Green Giant Fresh could also assume that a reasonable portion of the store customer universe would consist of individuals engaged in Farmville. In this regard, there was little guesswork. On the psychological side, the program linked the brand with a social environment whose central activity was growing food (albeit virtual food), and one where players were more or less compelled to visit frequently in order to keep their crops growing. These factors ensured the kind of repetitive reinforcement that has proven effective ever since the earliest days of mass media. The program worked, and resulted in a 10 percent uplift in sales the first month. These three programs comprise a progression from innovation to interaction to integration, and also demonstrate increasing levels of trust on the part of the consumer. The Nine Loves program, although extremely creative, is really quite similar to conventional loyalty programs. In the Gimme Love program, members are required to ask their friends to download a new app, which is not a small request these days given the plethora of dubious apps that exist. The Green Giant Fresh program asks (but does not require) that participants provide access to their Facebook credentials, which involves a significantly higher level of trust. In other words, these programs not only demonstrate ways to influence behavior, but to lay the emotional foundation for a long-term relationship. Twitter No discussion of social loyalty programs would be complete without mention of Twitter. Because of its content limits, Twitter by itself is usually not the best choice as a focal point for social loyalty programs. However, Tweets are extremely effective in