Transformers - Colloquy

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Transformers - Colloquy

V O L . 1 8 I S S U E 1 / 2 0 1 0

I N T H I S

I S S U E :

Strategy Report: The Pitfalls and

Potential of Persona Marketing

Trends Report: Will Post-Recession

Wallets Remain Clamped Up?

International Report: India’s Next-

Generation Loyalty Marketing

T H E A R T A N D S C I E N C E O F B U I L D I N G C U S T O M E R V A L U E W W W . C O L L O Q U Y . C O M

Transformers

From the iPhone to the Droid

to the Palm Pre, smartphones are

dramatically changing the way we

shop, buy, search, play and

connect with the world. For loyalty

marketers, these devices promise

new ways to engage in two-way

relationships with on-the-go

consumers and exciting new options

for mobile rewards, payments

and commerce. But they also

demand that marketers become

nimble, flexible and fast in the face

of an amazingly accelerated rate

of technological twists and turns.

Join COLLOQUY as we examine how

smartphones will transform the

loyalty-marketing landscape.

Published by:


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C O N T E N T S

COLLOQUY means

“conversa tion or dialogue.”

Providing loyalty thought

leader ship since 1990, the

COLLOQUY media enterprise

is your reliable resource for

innovative strategies that

drive profitable customer

behavior.

V O L . 1 8 I S S U E 1 / 2 0 1 0

10 / Transformers

Marketing with the device that’s transforming our world

8 / In Brief: Media Scene

Smartphones are revolutionizing

how we shop, buy, play and

connect with the world. These

devices promise new

ways loyalty marketers can

engage in two-way relationships

with consumers and exciting

options for mobile rewards,

payments and commerce. But

they also demand that marketers

become nimble, flexible and

fast in the face of an amazingly

accelerated rate of technological

twists and turns. Join

COLLOQUY as we examine how

smartphones will transform the

loyalty-marketing landscape.

Canada’s Cineplex movie theater chain

partners with ScotiaBank to make the

SCENE, a highly focused, mutually

beneficial loyalty program. And veteran

consultant and author Jeanne Bliss

asks the questions that will make your

company beloved.

18 / Strategy Report: The Perils of Pauline

COLLOQUY names names—the names used in

persona marketing—and cheers their potential,

but tattles on their potential pitfalls.

Innovative Loyalty Marketing: News and Opinion From COLLOQUY

www.colloquy.com/twitter www.colloquy.com/facebook www.colloquy.com/linkedin

22 / Trends Report:

Dear Prudence

www.colloquy.com

Recessionary spending

reductions will

likely cling to the

economy even when the

economic skies brighten.

Marketers face a significant value

shift—and it isn’t just about prices.

26 / International Report:

The Promise of India

The second-most populous country

is primed to step up its loyalty game.

30 / Analytics Report:

The Profitably

Engaged Customer

How to quantify the value

of the company-customer

interactions known as

engagement.

2/The Practitioner's

Perspective: High Noon

How card issuers can rally support

and regain loyalty-program trust.

4-5 / Loyalty Landscape:

Dis-Loyalty Cards

Vignettes of loyalty

through brand promiscuity.

6-7 / Touch Points

32 / Communications

Curmudgeon:

After the Rains

Strategic planting leads to bountiful

harvests.

1


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C O L L O Q U Y / Volume 18, Issue 1, 2010

T H E P R A C T I T I O N E R ’ S P E R S P E C T I V E

High Noon

How card issuers can rally support and

regain loyalty-program trust

B Y K E L L Y H L A V I N K A

IF THE MOST FREQUENT QUESTION POSED

to COLLOQUY this year is any

indication, the clock seems to be

ticking toward a financial services

high noon. “What’s the future of

credit and debit card rewards

programs?” we hear over and over.

“Are they living on borrowed time?”

Several factors are converging to

prompt this persistent question.

And, the underlying question is

if issuers can continue happily

doling out rewards and benefits to

loyal cardholders given the dramatic

stand off between issuers and

consumer interests. Those factors

include:

1. The Credit CARD Act of 2009—

largely in place effective Feb. 22,

2010—has changed how the

industry goes about its business.

Some issuers are turning to

additional fees not covered by the

Act, including charging for account

dormancy. The final two phases

of the Act, requiring clearer,

shorter disclosures and consumer

notifications—as well as new

protections for retail gift cards—will

be in place by the third quarter of

2010. In the coming months, the

media will naturally continue to

scrutinize how the banks react,

particularly with the speculation that

more cards–especially rewards

cards—will institute an annual fee.

After all, such fees will certainly

subdue interest in the affected cards.

2. Recent populist uproar has

portrayed banks as conniving

tricksters that must be put in

their place. At the very least, such

sentiment can lead to skepticism

about the motivations behind

rewards programs. But the uproar is

also leading to calls for regulation

beyond the CARD Act—regulation

that will further suppress creditcard

income and the ability to

fund such programs. In some

cases, the uproar takes the form

of consumer move ments like that

of creditcardrevolt.com, which claims

that the entire credit card model is

immoral and calls for reforms such

as capping credit card interest

rates at 15%. In other cases, there

are corporate move ments aimed at

garnering popular support—take,

for instance, 7-Eleven’s drive to

entice a million customers to sign a

petition calling for Congressional

action against “unfair and excessive

credit card transaction fees.”

3. The gnashing of teeth about

whether Congress should regulate

interchange fees won’t go away.

Calls for governmental intervention

on aspects of the “merchant discount

fee” (or interchange fee) charged

when a retailer or service provider

accepts a credit or debit card as

Bright Times at Their Peak?

COLLOQUY’s most recent loyalty

census shows astounding growth

in program memberships in the

financial sector, threatening to

eclipse the membership tallies

in the long-time leader, the travel

sector. On the other hand, are

the bright times beginning to slip

back into the travel shadow

after high noon?

Source: 2009 COLLOQUY Loyalty Census

164% growth

in the first half

of the decade

90.5

million

2000

payment have been loud lately.

Congressman Barney Frank,

chairman of the House Financial

Services Committee, claims that such

regulation “is not on the agenda

this year,” and Senator Arlen

Specter responds by saying he’s

“seriously considering” introducing

a bill for such regulation. If such

legislation were seriously pursued,

the underlying business model of

using a loyalty program to attract

and retain cardholders would be

demolished.

We’ve already seen such impact, in

Australia when regulators imposed

interchange fee limits in 2003. As

Todd J. Zywicki, a law professor at

George Mason University, noted in

The Wall Street Journal: “Annual fees

increased an average of 22% on

standard credit cards and annual

fees for rewards cards increased by

47%-77%. Card issuers also reduced

the generosity of their reward

programs by 23%. Innovation,

especially in terms of improved

security and identity-theft

protection, was stalled. Card issuers

also increased their efforts to attract

higher-risk customers who generate

interest and penalty fees to offset

lower interchange revenues from

lower-risk transactional users.”

23% of all program

memberships

Up 77% since

previous Census

238.8

million

2006

422.0

million

2008


The Interchange Cycle

The typical credit card transaction involves four parties in this flow of fees and payments (all dollar figures are by way of example).

As the GAO points out, “For transactions on the other two major card networks—American Express and Discover—generally only three parties

are involved: the cardholder, the merchant, and one company that acts as both the issuing and acquiring entities.”

$100

Cardholder pays

full amount.

Interchange Fee

Issuer keeps $1.70

$100.00 $100.00

$1.70

Issuer

The concern over borrowed time

also arises because loyalty initiatives

within the banking space have

recently enjoyed an astronomical

growth trajectory and overall

economic resilience. Despite the

deep recession that began in 2008,

rewards program memberships on

credit cards, debit cards and other

banking products have grown 77%

in a two-year period. And now, the

number of memberships in this

sector rivals even that of the travel

and hospitality sector. But, will the

trajectory begin a precipitous decline?

Darkest before the dawn?

To me, however, the question of

the survival of loyalty programs for

cards and banking services assumes

that banking executives will take a

purely reactive stance to these market

pressures. I wouldn’t presume to

underestimate the leaders in the

financial services space quite so

quickly, though.

While pontificating about the

threatened credit card legislation

is a fine, fun sport for the media, it’s

time for financial services marketing

leaders to use these distractions as

an opportunity to go on the offensive.

Consider Discover as one example.

In early February, Discover

introduced CardBuilder, an online

$100.00

Card Network

$100.00

$98.30

Vis a & M a sterC ard

Authorization Request

$100.00 $97.80

50¢

Acquirer

customers accumulate rewards for

their loyal business even faster; and,

banks can underwrite the cost of

more rewards across a broader

breadth of their product portfolio.

Ultimately, the real question isn’t

whether card-based rewards are

living on borrowed time as

consumers and issuers listen to the

clock ticking down to high noon.

The real question is whether the

factors gaining momentum along

main street will be the catalyst for

leading banks to build a holistic value

proposition that borrows value from

the smaller bottom-lines of each

of their business units. If financial

institutions rally internal support for

a customer-centric Total Relationship

Banking strategy, then high noon can

be a time of bright enlightenment

and transparency—not a stark and

menacing shadow.

Kelly Hlavinka directs all publishing,

education and research projects at

COLLOQUY, where she draws on her broad

experience as a loyalty strategy practitioner

in developing articles, white papers and

educational initiatives.

www.colloquy.com

Merchant fee (or loss)

$2.20

Acquiring Fee

Acquirer keeps 50¢

3

Billing Cycle

Payment Cycle

Source: General Accounting Office report to Congress, CREDIT CARDS: Rising Interchange Fees Have Increased Costs for Merchants, but Options for Reducing Fees Pose Challenges, November 2009

tool allowing customers to design a

card with the terms, design and

rewards most relevant to their needs.

As with previous initiatives such as

Garanti’s FlexiCard or CapitalOne’s

CardLab, Discover is providing

customers with a flexible way to

manage their finances and customize

the card they carry. This is but one

way to change the tone of the dialogue

about credit card practices and place

more emphasis on transparency

and control.

While pontificating about the threatened credit card legislation

is a fine, fun sport for the media, it’s time for financial services

marketing leaders to use these distractions as an opportunity

to go on the offensive.

Perhaps the greater opportunity for

banks lies in grabbing the reigns

and finally embracing the Total

Relationship Banking opportunity.

Let’s face it. Payment delinquency

rates are still uncomfortably high.

And, the pressure on the credit

card business model isn’t likely to

subside. Rather than use the

marketplace pressure as rationale

for ratcheting down credit card

rewards value propositions, why not

finally pursue a holistic rewards

strategy that rewards customers for

all of their banking relationships

with your company? After all, that’s

where the real “win-win” resides:


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L O Y A L T Y L A N D S C A P E

LOSE

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Photo: Liz Clayton

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Latte Loyalty (or, “Drip Dialogue”)

In a gesture reminiscent of the Macy’s Santa telling

shoppers to patronize Macy’s competitors for

out-of-stock toys in the classic film Miracle on

34th Street, England’s renowned coffee barista

Gwilym Davies is asking coffee aficionados to

taste the wares of other East London coffee

emporiums. His device: a self-proclaimed “Dis-

Loyalty” card. Complete the card by quaffing at

eight area coffee shops, and Davies will personally

make you a cuppa at his shop. And the reward

offered by this coffee-eclecticism ambassador isn’t

inconsequential. After all, Davies is the reigning

World Barista Champion, crowned at the 10th

championship in Atlanta in 2009.

Davies is ultimately showing loyalty to his customers by encouraging the rewards of

benevolent shopping promiscuity, which can only increase customer loyalty to him. And

this very sort of innovative thinking in customer engagement is COLLOQUY’s cup of tea.

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Jeopardy!

Self-Propelled Word-of-Mouth

Given our coverage of smartphones this issue, COLLOQUY felt the

need to add our smartaleckphone coverage, as well. A Dial-a-Phone

blog recently compiled “10 Ridiculous Ideas About the Future of

Mobile Phones,” including “datoos” (data tattoos that implant

communications technology on your arm) and “jewelry that makes

calls” (have they not heard of Dick Tracy’s wrist radio?). We were

taken, however, by Dial-a-Phone’s inclusion of a technology that’s

actually available now—wind-powered phones. Will the chitchat of

phone-addicted windbags using wind-powered phones make

perpetual motion achievable?

“We’ll take entertainment loyalty initiatives for $500, Alex.” Remember to give

your answers to the clues in the form of a question.

Clue: Premiere Club. Answer:“What is Sony’s new viewer loyalty program related

to the long-running game show?”

Clue: Exclamation Points. Answer:“What are the points earned by Jeopardy!

watchers not called, even though they should be?”

$

Also, we should note that Sony also runs the Wheel Watchers Club on Sony

Rewards program—associated with Wheel of Fortune—which reached 5

million members in May 2009. Members of the Wheel Watchers Club have

been awarded cars, cash, dream vacations and the occasional free vowel.


Enter the Ninja

Move/countermove—the basis of all styles of combat, but particularly apparent in the martial

arts. Opponents move, ninjas countermove. And so it must be in the marketing wars.

Recently we spotted an attractive but cynical visual guide to becoming “a Points Ninja” so

consumers “can turn reward points into instruments of price destruction.” This guide was

created by WallStats.com, which specializes in bringing statistics to poster-sized visual clarity.

This particular WallStat depicts the moves that the graphic’s creator assumes are behind

loyalty marketing tactics, and then stresses ninja countermoves. Loyalty move: encourage

program signup. Cynical ninja countermove: “There are lots of options out there to save

money: cash back, low interest, regular old coupons. But only reward points make us feel like

we are playing Skee Ball. Play the game, get tickets, redeem for a plastic whistle, Slinky and 5

Tootsie Rolls.”

We as marketers know this is neither the strategy nor the benefit of loyalty programs. Yet we

must also know that those perceptions are out there, and therefore our job is to dispel such

perceptions among our customers, and to never allow them to form in the first place by stressing

transparency in the value exchange.

Contemplate the credo of the Points Ninja: “Earning points is another way shopping gets

turned into an expensive game.” This is the slicing move of the cynical consumer.

Now, savvy marketer, what’s your countermove?

Points of Contention

Scotland’s Daily Record lists the

top five "bizarre items" that Scots

divorcing couples contested in

2009, according to a survey.

Second on the list, between sex

toys and power tools, were loyalty

program points. Pets and bed

sheets rounded out the top 5.

An interesting day when people

are more loyal to their program

than they are to eachother.

Note: pictured couple are professional models, probably neither married to nor divorced from each other and likely not Scots

Loyalty’s Breakin’ Out all Over

www.colloquy.com

COLLOQUY has demonstrated

the pervasiveness of loyalty

programs in its two loyalty

sizing studies. The latest such

census shows that the average

household belongs to 14

programs—in part because

programs are showing up where

you wouldn’t normally expect

them. Here we offer anecdotal

evidence of unanticipated

growth in the form of some

interesting surprises:

• Reports Bloomberg: “Finnair Oyj, Finland’s biggest airline, has a new idea for attracting

frequent flyers: free plastic surgery in exchange for air miles. Breast implants, hair

replacement surgery or a face-lift performed by the Nordstroem Hospital in Helsinki

are among the newest offerings in the carrier’s Finnair Plus loyalty service, according to

the program’s Web site. . . . Earning the 3.18 million points for breast augmentation

surgery requires 120 round-trip, business-class flights between Helsinki and New York.”

• Reports U.K.’s Telegraph: “The Transform Cosmetic Surgery Group is advertising a £750

price reduction for patients who go ahead with ‘any two surgical procedures’ including

liposuction and breast enlargements before 31 December.”

• Reports TransWorld News: “Commerce Online Inc. has announced an agreement and

partnership with RedFin Network, Inc., a wholly owned subsidiary of Secured Financial

Network Inc., to launch their pre-paid loyalty and ID card for licensed medical marijuana

dispensaries and collectives operating within California and Colorado.”

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C O L L O Q U Y / Volume 18, Issue 1, 2010

T O U C H P O I N T S

Karmic Loyalty

The positive road to loyalty nirvana

IN ITS SIMPLEST DEFINITION, the concept

of karma intertwines cause and effect.

The word itself means “action”: Your

actions affect others, of course, but

they also affect you. It’s basic stuff:

Put out good vibes, you get good vibes

back. Put out bad vibes . . . you get

the idea.

I slipped into this moment of Zen

contemplation while reading about

InterContinental Hotels Group

(IHG) wooing Hilton HHonors

members with a “Luckiest Losers”

competition. This action, I feared,

would have karmic implications

not only on the specific programs

involved but also on the loyalty

industry as a whole.

The back story: In January 2010,

Hilton raised the number of

HHonors points required for a free

stay, which Hilton executives said

brought them in line with their

competition’s offerings. Responding

to what many consumers saw as a

devaluation of HHonors points,

IHG’s promotion “gave back” more

than 400 million Priority Club

Rewards points to members who had

“lost” the most HHonors points.

Yes, it’s a competitive initiative, and

vigorous competition is expected in

any business. Yes, it’s an original

initiative, and we at COLLOQUY

certainly encourage marketers to

avoid copycat tactics. But the tone of

this promotion takes competition

to an entirely new level within the

B Y D E N N I S A R M B R U S T E R

loyalty industry. It amounts to a

negative war of words–as well as

creates an environment of points

commoditization that we believe

bodes poorly for loyalty programs.

Loyalty, after all, is something

of a karmic marketing endeavor,

building brand engagement and

two-way relationships by creating

a positive message and experience.

Positive action in differentiating

your product or service with a unique

loyalty value proposition reinforces

your relationship with customers.

Negative action, such as sniping at

the competition, might attract both

attention and customers in the short

term, but the long-term vibe will

return skeptical consumers looking

for the best deal instead of cement ing

a rewarding relationship.

Think of loyalty programs as an

accelerator along the long road to

brand enlightenment—the beautiful

wrapping that surrounds a wellthought-out

approach to sound

products, sound pricing, and a sound

service model. Positive messaging

illuminates; while negative messag -

ing casts shadows by threatening

to turn loyalty programs into a

commodity or, worse yet, a weapon.

Invoking the karmic return of

such negativity is not a sustainable

strategy.

So, loyalty Zen masters, what strate -

gies should you be contemplating?

Looking at the frequent-guest

program landscape as we are, let’s

consider three approaches currently

in market:

Seek and destroy: In my opinion,

that’s what IHG unleashed when it

jumped all over Hilton’s re-jiggered

HHonors offerings. This kind of

negative approach won’t likely work

in the long term for any company

that wants to underscore how their

loyalty strategy stands out in order

to curry good feelings from

program members.

Match to get in the mix: Best

Western recently unveiled its “Status

Match, No Catch” program, in which

the chain promises to match the elite

status of any other hotel loyalty

program. The initiative quietly woos

the competition’s customers without

the accompanying “nyah-nyah” tone

of discourse. It offers customers

the feeling of a company stepping in

to save the day, but without “tearing

down the enemy.”

Va-va-voom value proposition:

Marriott’s elite rollover offer exudes

loyalty karma. Marriott’s action

put forth their own unique vibe,

offering something that no one

else was providing–the prospect of

rolling over to the next year any

elite-qualifying nights in excess of

the elite status minimum. Sure,

Negative messaging casts shadows by threatening to turn

loyalty programs into a commodity or, worse yet, a weapon.

another company could come

along and match it (to get in the

mix) but since Marriott’s move in

June 2009, no one has.

My suggestions to marketers, then?

Adopt a karmic mantra composed of

but three words: Assertive, Innovative,

Communicative.

Assertive: Own the space. Be the first

and be bold to leapfrog the competi -

tion. Don’t be tempted to define

what you are by what others aren’t.

Innovative: Don’t borrow or hijack

the competition’s space. Make sure

your effort is truly innovative–not

simply a copy.

Communicative: Don’t be silent

about standing out. Demonstrate

clearly how your offering is special,

that your value proposition is an

internal boon and not an external

loss, and the karmic return will be

members who feel recognized and

rewarded for investing their loyalty

in you.

Dennis Armbruster is Managing Partner of

LoyaltyOne Consulting.


T O U C H P O I N T S

Exercise Programs

The loyalty marketer’s guide to program

fiscal fitness

B Y A L I N E O S T R O W S K I

AGING GRACEFULLY IS EXPENSIVE. Many

of us begin noticing fine lines and

wrinkles requiring costly eye and

night creams. And others of us face

a few extra pounds as the years pass—

I admit that I’m among those who do.

I’m addicted to television shows like

The Biggest Loser, even though these

remarkable stories about significant

weight loss aren’t relevant to my

situation. I don’t need to lose 80 or

100 pounds—just the 15 pounds I

managed to collect as a prize for

turning 40. Besides, my budget

doesn’t allow for a personal

trainer. So what do I do to shed a

little weight within my budget?

Interestingly, I found some answers

in best practices of my day job.

Loyalty programs face a similar

predicament, striving to maintain

their image within an existing annual

budget. Many programs, like some

of my friends in the over-40 crowd,

don’t need a dramatic overhaul, but

instead only a few changes in habits

or practices to maintain their appeal.

Here are six touch-your-toes

exercises you can employ to tone up

your program—no eye cream involved:

Create excitement with a new

look. They say vertical stripes are

slimming—apply a few to your

program. The audio and visual

component of marketing creative

captures member attention and works

to spur response. A simple way to

reinvigorate program awareness is

to update and frequently change the

creative images and content within

your marketing—this includes web,

email, direct mail and signage.

Work out as a team. Increase program

relevance among member segments

as your customers travel along

program lifecycles. Gather primary

or secondary research about existing

segments to understand members’

attitudes regarding macro trends and

the program itself. Although this

information might reveal the need to

revisit the overall value proposition,

it can also influence marketing

strategies and reward offerings in the

short term to ensure that marketing

layout and messages maximize

member interests.

Exercise undeveloped muscles.

Redefine member experiences. Just

because customers choose to remain

in your loyalty program doesn’t

mean that they’re getting everything

they need from all your program

touch points. In this world of fast

technological evolution and adoption,

knowing what your members expect

when they interact with you is critical.

For example, examine your website

paths to see where members drop

off. Seek opportunities to simplify

the member website experience

through design or content changes.

In bricks-and-mortar locations,

take a fresh look at how members

interact with the program in-store

and at point of sale to discover

opportunities to improve signage

and its placement.

Don’t try to be a hard body.

Introduce new soft benefits—rewards

based on recognition and privilege,

like special access to brand-related

special events and tier-specific

product previews. Although the value

proposition is the primary driver of

member participation, soft program

perks are also key to maintaining

customer affinity. Ensure that your

program offers the right perks to the

www.colloquy.com

right members. If your program

doesn’t yet feature soft perks, develop

a plan to give higher-value members

prioritized service and special

opportunities to earn and redeem.

Institute recognition benefits

and extend small bonuses between

redemption instances. If your

program already features soft

benefits, ensure that marketing

efforts focus on member interests

and preferences.

Develop a workout support group.

Employ new media outlets to

leverage program advocates. For

loyalty programs, all the recent

applications made available through

social networking provide new

opportunities to identify and benefit

Many programs, like some of my friends in the over-40 crowd,

don’t need a dramatic overhaul, but instead only a few

changes in habits or practices to maintain their appeal.

from member advocates. Provide a

stage for them. Social networking

vendors and agencies can facilitate

cost-effective solutions that extend

beyond Facebook fan pages. Finding

the right tool to display and promote

member dialogue can both inspire

and educate other members.

Hire the most effective trainers.

Learn from your members—they’re

the ultimate taskmasters who will put

you through your paces. Supplement

surveys and data analysis by

developing a formal member panel

to guide program evolution.

Just like people, programs mature

and risk adding some love handles.

And as in exercise and weight loss,

there are no shortcuts—but also

often no need to undergo major

surgery. Instead, with a regular

regimen that recognizes the need

for constant attention and regular

workouts, your program can shed

just a few pounds and remain sleek

and attractive.

Aline Ostrowski is a LoyaltyOne consultant

and the originator of the Ostrowskasize

Weight Loss Program coming soon to an

infomercial near you.

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C O L L O Q U Y / Volume 18, Issue 1, 2010

I N B R I E F

Oscar Ceremonies

An odd couple makes a powerful

loyalty pair

Brian McCabe,

Scotiabank’s Vice

President of Strategic

Initiatives and

Partnerships

Dan McGrath,

Executive Vice President

Cineplex Entertainment

B Y J O S H M I L N E R

ON PAPER, A BANK AND A MOVIE THEATER

have little in common—other than,

a wag might say, waiting in line in

those not-so-long-ago days before

online banking and ticketing, But

Canada’s Scotiabank and movie

theater chain Cineplex discovered

a compatible connection—through

a customer loyalty program. This

compatibility led three years ago to

their partnered launch of SCENE,

an entertainment rewards program

that now boasts over two million

members across Canada.

Odd couple? Hardly. According to

Brian McCabe, Scotiabank’s Vice

President of Strategic Initiatives and

Partnerships, the alliance has been

extremely successful—with no Felix

and Oscar-like clashes to be found.

“It’s amazing how like-minded we

are and how strong the partnership

is,” says McCabe. “It’s very

collaborative”—with each other, and

with the program members.

The SCENE program originated in

early discussions of a possible

Cineplex co-brand credit card. While

Cineplex had already investigated

starting a loyalty program, the

partnership concept was Scotiabank’s

idea, recalls Dan McGrath, Executive

Vice President, Cineplex

Entertainment. “Rick White, who

was Vice President of Marketing at

Scotiabank, had the thought to say,

‘Maybe there’s something here that

can work for both of us.’”

The “something” was mutual benefit.

The partnership vehicle allowed

Cineplex to extend its reach to

Scotiabank customers, while

providing the means to collect data

about customer behavior. Access

to data was “absolutely critical” to

Cineplex’s interest in a loyalty

program, says McGrath. “At the time

we started the program, we had about

63 million people coming through

our doors, but we didn’t know

anything about their preferences. We

didn’t know anything about them.”

On the other side, Scotiabank’s

primary interest in the SCENE

partnership was the potential of

increasing customer acquisition

and retention, particularly among

18- to 44-year-olds. “In those ages

in particular, we were seeing slow

growth and high turnover, so it was

an attempt to make us more relevant

to them,” says Brian McCabe.

The plot (but no spoilers)

A SCENE loyalty card allows members

to accumulate points redeemable

toward such rewards as movie tickets,

popcorn and other concessions,

DVDs, music downloads, and

participation in contests for concert

tickets and one-of-a-kind

experiences. A movie ticket

redemption, for instance, costs 1,000

points. Members earn 100 points

for each adult movie ticket purchased,

and 250 points for signing up.

Scotiabank also offers a SCENE

ScotiaCard debit card and SCENE

Visa credit card, which award one

point for each dollar spent, and

award 1,000 and 2,000 points,

respectively, as a sign-up bonus.

The starring players in this

successful cinematic production

include:

High-Definition focus.

Leveraging a laser-like focus on an

audience with a passion for

entertainment has been central to

SCENE’s success, “We found a place

in pop culture that’s relevant with

people, revolving around things

“We found a place in pop culture that’s relevant with people,

revolving around things people do regularly, allowing them

to use their cards often.” —Brian McCabe, Scotiabank

people do regularly, allowing them to

use their cards often,” says McCabe.

The SCENE audience’s passion also

allows the program to stretch beyond

base rewards to unique offerings,

adds McGrath. “The opportunity for

members to go watch the Tragically

Hip live as we record an event from

their studio in Kingston, Ontario,

and create some of those once-ina-lifetime

experiences, goes far

beyond anything that’s just about

going to the movies.”

A primary goal of SCENE, McCabe

says, is continuing to keep the

program fresh. “We don’t want to

just leave the program as it is and

rest on our laurels,” he says. Other

partners that have recently been

brought into the SCENE program—

including Live Nation for concert

tickets and Sirius for satellite radio

bundles—deliver that freshness, yet

retain the high-def entertainment

focus. Scotiabank and Cineplex hope

to soon bring in a dining partner, so

that redeeming points for “dinner and

a movie” becomes a realistic option.

Simplicity of participation. Sign-up

is free and can be completed in just a

couple of minutes in a movie theater.

Then and there, a temporary SCENE

Continued on page 20


I N B R I E F discuss the fundamental differences the door, they feel that four or five

in the DNA of companies that ombudsmen are there to take them

achieved a level of “belovedness” through the experience. You can

with their customers as well as their establish that comfortable persona

employees. I wanted to show what when you decide the standards

drives the decision-making in you’re hiring to, and won’t settle

these companies. I did two years for anything less.

Becoming Beloved

A C O L L O Q U Y Q & A

Conversation with Jeanne Bliss, author of

“I Love You More Than My Dog”

Jeanne Bliss, Author and Managing Partner of

Customer Bliss

Jeanne Bliss has been passionate about

customers since her start in 1983 at

Lands’ End, Inc., where she served as

head of customer experience. Today,

she is the managing partner of coaching

company Customer Bliss and the author

of Chief Customer Officer. Bliss’s

latest book, “I Love You More Than

My Dog”: Five Decisions that Drive

Extreme Customer Loyalty in Good

Times and Bad, released in October

2009, has become a BusinessWeek

bestseller and Inc. named it one of its

top books of 2009 for business leaders.

COLLOQUY sat down with Bliss to find

out more about the essential decisions

companies like Apple, Trader Joe’s,

Zappos and Southwest Airlines make

that inspire customer love and devotion.

COLLOQUY: How did the book come

about?

BLISS: This book is actually the

prequel to Chief Customer Officer,

which talked about the mechanics

of operationalizing customer

experience. But that book didn’t

of research and came up with five

essential decisions that differentiate

beloved organizations, including

deciding to believe in delivering

on a higher purpose—believing in

their employees and their customers.

Beloved companies have a humanity

about them, a personality that

establishes true connection with their

customers. They decide to give their

employees permission to bring the

best versions of themselves to work.

They operationalize from the

customer’s point of view. And they

’fess up on those occasions when

they make mistakes.

. What empowers such decisions?

A. Each of these decisions is a

corporate-held belief, which then

becomes owned at the individual

level. I wrote the book not just for the

key leaders in the company, but for

every employee. You have the power

to believe and to be believed in your

individual transactions. You have the

power to deliver on memory that

customers will take away and cherish.

It starts with how you select the people

who are part of your company.

Being clear about the personality,

characteristics and values of the

people you want to bring on board

plays a huge part in enabling them to

bring the best version of themselves

to work. Customers connect with

people they feel they could talk with

on the street, delivering a feeling of

trust. The Container Store is a great

example. Their mantra for employees

is, “Are you being Gumby?”,

communicating that the Store

requires employee flexibility on the

floor. When customers walk in

www.colloquy.com

“The biggest challenge is enabling consistency and

repetition, reinforced not by the top leaders but the middle.

It’s always about the middle.”

. What’s the biggest obstacle to

getting those important decisions to

have an impact on the company?

A. The biggest challenge is enabling

consistency and repetition, reinforced

not by the top leaders but the middle.

It’s always about the middle. The top

may have a commitment, but the

middle translates that commitment.

And these decisions aren’t layered on

like a campaign. The commitment

to customers and to these decisions

is woven into the fiber of how beloved

companies operate. For example,

IKEA designs for the price first

because they have such clarity about

their place on the planet in terms of

retail. They know clearly how much

somebody just starting out will spend

on a chair. Once you believe in your

customers and your employees, once

you have clarity in what you deliver,

and once you establish a personality

and a humanity that connects with

customers, then you create an

operating plan.

. What’s the one thing that would

make you proudest for readers to

take away from your book?

A. The understanding that they can

do this, that they can make the five

decisions that beloved companies

make—to believe, to exercise clarity

of purpose, to be real, to “be there,”

and to say “sorry” when it’s

appropriate. I would be proudest

if readers come away inspired,

believing they can do it because

anyone can do it.

To read the first chapter of “I Love

You More Than My Dog,” visit

www.colloquy.com/customerbliss

9


10

C O L L O Q U Y / Volume 18, Issue 1, 2010


www.colloquy.com

From the iPhone to the Droid to the Palm Pre, smartphones

are dramatically changing the way we live—how we shop, buy,

search, play and connect with the world. For loyalty marketers,

these devices promise new ways to engage in two-way

relationships with on-the-go consumers and exciting new

options for mobile rewards, payments and commerce. But they

also demand that marketers become nimble, flexible and fast

in the face of an amazingly accelerated rate of technological

twists and turns. Join COLLOQUY as we examine the

current and future outlook of smartphones and how they will

transform the loyalty marketing landscape.

Transformers

By Sharon M. Goldman

WOULD OPTIMUS PRIME CARRY AN IPHONE? After all, what better

communications device for the heroic Autobot leader in the

Transformers universe of toys, comic books and movies? Shapeshifting

from his guise as a purely utilitarian machine—a truck

known as Roller—into a towering technological powerhouse,

Optimus Prime serves as a playful but crisp metaphor of how

personal communication is morphing in the new millennium.

The utilitarian telephone, whether landline or wireless, has

transformed itself into the almost toy-like smartphone hugely

popularized by the shiny, sassy, touch-friendly, techno-wondrous

iPhone.

With Autobot power, the iPhone and the smartphones that

have followed since its debut in June 2007 have similarly

transformed the lives and imaginations of millions of

11


12

C O L L O Q U Y / Volume 18, Issue 1, 2010

consumers, enabling them to take their mobile devices

far beyond just a handset, thanks to a new App Store

universe, as well as improved web browsing and access

to photos and video. The smartphone allows users to

do things they never thought could be done without

being tethered to a home or office computer, from

comparing store prices and searching for restaurant

reviews to checking into a hotel and social networking.

Just as the internet of the ’90s opened our eyes to how

we could expand our lives beyond our immediate

communities, the iPhone of the ’00s gave us a glimpse

into the powerful, personalized future of life on-the-go.

As Optimus Prime says of the mysterious Cube that

supplies his origins, “it holds the power to create worlds

and fill them with life.”

“The iPhone really changed the mobile phone from

being a communication device to being a multimedia

device,” says Maria Mandel, Senior Partner, Executive

Director Digital Innovation at Ogilvy, and North America

Board Chair of the Mobile Marketing Association. “That

opened the floodgates and since then we’ve seen an

overwhelming number of consumers start demanding

those types of devices.”

“My viewpoint is there will be an evolutionary

process for mobile marketing. The amount of what

you have available in the mobile marketing

space is tremendous—there are a lot of toys in

the sandbox.” –Maria Mandel, Ogilvy

As smartphones increasingly entrench themselves as

the ultimate personal device, it’s no surprise that

loyalty marketers are keenly interested in the evolving

role technologies will play in increasing customer

loyalty overall, as well as in boosting reward programs.

After all, these pocket-sized portable wonders offer

promising ways to strengthen the two-way relationship

between companies and their customers, the very sort

of relationships enjoyed by loyalty programs and their

members.

From toys to blockbusters

But exploring these expanded opportunities is not for

the faint of heart. Marketers must be more nimble and

flexible than ever, dynamically staying abreast of quickchanging

technologies, while at the same time working

as careful decision-makers as trends emerge, develop

and mature. For example, a brand may wade into the

wild world of iPhone apps, decide to develop a mobilefriendly

website, or invest in a new mobile couponing

solution, but no one can predict the shape those tech -

nologies will morph into down the road—probably not

into giant robots, but who knows? Therefore, companies

must be able to shift and evolve as consumer behavior

changes.

Still, after years of hearing about mobile marketing

as “the next big thing,” the reality is that smartphone

technologies remain in the early stages of development—

and going forward, Maria Mandel points out, we may

likely see a continued rapid progression and adoption

that eventually leads to total transformation, rather

than the kind of “eureka!” moment that the iPhone

brought to the landscape.

“I don't honestly know if there will be a definitive ‘year

of mobile,’” Mandel says. “Instead, my viewpoint is

there will be an evolutionary process for mobile

marketing. The amount of what you have available in

the mobile marketing space is tremendous—there are

a lot of toys in the sandbox.” That means, she says, more

marketing opportunities—but also more complex

decisions to make and more experimentation to be done

in order to determine the value of those opportunities.

Still, the numbers racked up by consumers using the

new generation of smartphones are mindboggling

enough to keep marketers salivating and plotting next

steps: In just two years, over 2 billion downloads of

more than 100,000 iPhone apps have been counted,

according to a survey by Luth Research and the Mobile

Marketing Association, while 40% of all U.S. adult

consumers have downloaded at least one mobile

application. Mobile web use has also soared, with more

than 450 million users worldwide, a number expected

to surpass the one billion mark over the next four years,

according to IDC Worldwide Digital Marketplace Model

and Forecast.

The stats are so overwhelming, in fact, that according

to Nielsen research, by 2011 smartphones will likely

constitute the majority of cell phones in the marketplace,

with more than 150 million cell phone subscribers

using the smarties worldwide. Nielsen shows that in the

fourth quarter of 2009, 30% of new cell phones sold

were smartphones, up from 25% the previous quarter.

And for the first time, in the third quarter of 2009,

more people accessed the internet from smartphones

than from regular cell phones.

“The center of gravity has shifted,” says J. Gerry Purdy,

Ph.D., Principal Analyst, Mobile & Wireless at MobileTrax,

a mobile and wireless market research firm. “People

are spending more time with their mobile devices,

doing more transactions and activity. The value of that

phone is growing.”

It’s already clear that smartphone users are an extremely

attractive audience to marketers, particularly because of

their increased usage patterns. “People with smartphones

are using them more than any other type of phone,”

says Tim McCauley, Director of Mobile Commerce at

Walgreens, which recently revamped its mobile website


and introduced a new iPhone application allowing users

to upload photos directly from their mobile device to a

Walgreens store for printing. “That doesn’t mean we won’t

have other programs to help out all of our customer base,

but the customer with the smartphone is browsing the

mobile internet much more frequently.”

Coming to a smartphone screen near you

Loyalty programs aren’t being left behind: Some

marketers are already making the move into mobile

loyalty efforts, including Starbucks, which has tested a

loyalty program based on 2D barcodes deployed through

SMS; Starwood Hotels, whose Starwood Preferred Guest

program now boasts its own iPhone application in which

members can access their account on their mobile

device; and Hilton Hotels, which tracked how its best

HHonors customers used its mobile website before

deciding how to best develop several brand-specific apps.

“A whole generation of consumers is online and moving

to mobile – that is how they receive their information,

that’s how they get their product information, that’s where

they get their offers,” says Bruce Pryor, Vice President

of Marketing at Zavers, whose mobile couponing platform

ties directly into existing client loyalty programs such as

A&P and Pathmark. “These consumers are not reading

the newspaper to get the FSI’s as they did in the past. The

mobile component is perfect for reaching that consumer

in the environment they are comfortable with.”

Mohammad Khan, Founder and CEO of ViVOtech, whose

contactless NFC sticker technology for existing phones

integrates with loyalty programs to drive coupons,

promotions and mobile payment options, agrees that

mobile loyalty is nearly ready for its close-up. “Loyalty

is going to move to the next level with mobile, in terms

of being associated with all of those things you enjoy in

real time when you are out there shopping,” he says. “At

the end of the day, it's the kind of CRM companies have

been looking for, because mobile makes it very personal,

with methods that have more value to customers.”

According to Jerry Rocha, Vice President of Mobile Media

at Nielsen, the current massive migration to smartphones

is due to several stars aligning within the industry,

including cheaper data plans, bigger screens, faster

networks, better keyboards and touch screens, more

available media, and increased functionality. “With all of

these factors,” he says, “when you start thinking about this

from a worldwide perspective, it’s a big game-changer.”

Resolving some of the problems that faced early

smartphones with faster downloads, easier web-surfing,

and more user-friendly functions means that the smarties

can now begin to meet a wider target market’s

requirements, adds Dr. Purdy. “The functionality is good

enough that now the smartphone can serve a larger

Dialing Smartphone Numbers

Revenue from app downloads from stores worldwide will explode

over the next three years, though not as fast as the number of

downloads themselves. Gartner explains that there will be a shift

from today's early adopters, willing to pay for cool and useful apps,

to a greater percentage of mainstream users more interested in

free apps. "Advertising-sponsored mobile applications

[included in the revenue numbers]

+380%

will generate almost 25% of mobile

application stores revenue

by 2013," says Gartner.

• Source: Dataquest Insight: Application Stores; The

Revenue Opportunity Beyond the Hype, Gartner, 2009

• 2010 projected growth figures based on

increases over 2009 (base: 2.5 billion downloads

and $4.2 billion in revenue in 2009)

• 2013 projected growth figures based

on increases over 2010

4.5 Billion

Downloads

+79%

2010

$6.8 Billion

Revenue

+58%

audience and is relatively inexpensive,” he says. “We

have reached a point where we’ve migrated out of the

‘gee whiz’ phase as far as this technology.” And from a

marketer’s perspective, he says, companies can reach

a growing audience with capabilities that reach all

industry sectors at good price points.

As smartphones become more dominant over the

next few years, Purdy says, their applications and

functions will continue to mature and people will

progressively feel more comfortable using their cell

phones for more tasks and transactions: “There is a

cultural and social acceptance, versus something

people are afraid to do.”

As a new decade gets underway, smartphone penetration

is expected to build steadily, while mobile broadband

use continues to grow, beta-tested technologies are

refined, and data plans get even cheaper. At COLLOQUY,

we believe mobile technologies will eventually evolve to

play some of the following roles for loyalty marketers:

As a loyalty membership ID: The mobile phone

could serve as a replacement for the traditional

loyalty card or keychain tag, offering a new way to

load or accrue rewards.

As a points redeemer: While a mobile device can be used

as an ID to allow customers to earn points, it can also

21.7 Billion Downloads

www.colloquy.com

2013

$29.5 Billion Revenue

+335%

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C O L L O Q U Y / Volume 18, Issue 1, 2010

Transformation Checks In

Hilton Worldwide has introduced a range of banner-specific

smartphone apps, which enable users to check in

and out remotely, set preferences, check

HHonors points totals, and so on.

serve as a way to redeem points based on an existing

account balance.

As an instant program update channel: Loyalty

programs can efficiently connect members to updated

program information, program news, and “close to”

reward announcements.

As a high-impact communications vehicle:

Opportunities exist for consumers to create communi -

cations preferences; receive location-specific services;

and obtain on-demand access to loyalty program

information on-the-go.

As a delivery channel for rewards and recognition

benefits: Some marketers have already begun delivering

actual rewards benefits via mobile, whether through apps,

2D barcodes, coupons or member-only games, events

or content.

Waiting for the critics’ reviews

As encouraging as smartphone development has

been, however, there’s still a long way to go in terms

of consumers taking full advantage of the available

technology. Experts agree that despite encouraging

growth, North America remains in the early days of

smartphone adoption and consumer interest. After all,

according to recent Forrester research from the fourth

quarter of 2009, about 17% of cell phone subscribers

own smartphones, though predictions exist for that

number to rise to 25% next year. For the time being,

the remaining users are sticking to simpler, typically

very inexpensive, traditional cell phones—known in

the mobile industry as “feature” phones.

“Most U.S. consumers are still not yet interested in

taking advantage of phone technology,” says Van Baker,

Research Vice President at Gartner Research. “For the

average person, it’s not something that’s part of their

daily life.”

The opposite is true, however, in other parts of the

world: For example, Asia offers faster speeds on their

mobile devices and more advancements. “It’s probably

because they don’t have some of the carrier and handset

issues we have here, plus they have more uniformity,”

says Maria Mandel. “There are more opportunities in

their overall structure to access the internet and video

content, and it's more affordable there to get a mobile

device than a landline or a computer.”

Europe, too, has a culture more centered around

leveraging the mobile phone. “They’re used to paying

for things using the phone, for instance,” says Baker.

“It's also a cultural issue—in Europe, people tend to

walk a lot more in city centers, so it’s not practical to

be running around with a laptop.”

In the U.S., one challenge is overcoming smartphone

data usage limitations faced by carriers offering popular

unlimited data plans: For example, AT&T famously

stopped selling iPhones in New York City for several days

over the 2009 holiday season—it claimed its unlimited

data plans had led to just 3% of smartphone users

consuming 40% of its data traffic and compromising

its networks.

In addition, while mobile web browsing is booming

and consumers are becoming more comfortable with

completing shopping transactions on their mobile

devices—one recent survey showed that 37% of

smartphone owners purchased merchandise using

their devices in 2009—poor site functionality, such

as extended page-loading time, can be a turnoff,

particularly as expectations for ease of mobile browsing

rise. Recent Forrester data shows that customer

willingness to wait for a page load before abandoning

a site cuts off at two seconds or less (down from four

seconds just a few years ago)—and page load speeds

for mobile retail sites range from 2.18 seconds to six

seconds at worst.

For now, with most Americans still holding onto their

traditional “feature” phones, marketing through “push”

messaging—using SMS and MMS texts—is still where

marketers will see their most mass-market success,

Mandel says. “From a North American perspective, the


primary marketing opportunity is within messaging,” she

says. “That’s where you’re going to reach your broadest

audience. Messaging is a great way to give a time-sensitive

or location-based alert.”

But looking ahead, particularly with the favorable

youthful, high-income demographics of smartphone

users, most marketers are getting into the smartphone

game in some way, typically by developing a branded

app or creating mobile websites with various functions

relating to commerce, entertainment or financial

services. The idea is to increase customer loyalty by

giving customers what they want, when they want it and

how they want it—and mobile offers an enticing way

to do just that.

“It’s been phenomenal to watch the growth and change

in terms of consumer expectations about what they can

do on their mobile phone and the ability to do things

immediately when they are top of mind,” says Arah

Erickson, Vice President and Head of Wells Fargo Retail

Mobile Banking, which boasts a popular mobile website

as well as an iPhone app. The mobile site is designed

specifically to make it easy and quick to get things done

on your mobile device with fewer clicks, while its iPhone

app also offers users the ability to find an ATM or

branch based on your mobile device's current location.

“Smartphones offer a really exciting opportunity for

us—there’s no question that their use will just

continue to grow. Also, we’ve recently expanded our

text banking service to all of our customers, even

those who have yet to enroll in online banking.”

For executives at Hilton Hotels, the fast-growing

popularity of its mobile site led the company to jump

into the app universe, launching seven brand-specific

versions that boosted their loyalty offerings, says Chuck

Sullivan, Senior Vice President of Global Online Services

at Hilton Hotels. The apps enable guests to check in

and check out, order room service, take advantage of

concierge offerings, and check their HHonors loyalty point

level. “The feedback has been so positive,” Sullivan says.

“These are things that are truly valued by guests.”

As the smartphone market matures, countless vendors,

agencies, applications, platforms and technologies fight

for leadership and influence—not to mention a halfdozen

operating systems as well as a slew of telecom

providers and handset manufacturers. The landscape

is confusing and complex, but loyalty marketers should

certainly sit up and pay close attention to the following

five here-to-stay trends that may influence decisionmaking:

1. Apps are still where it’s at. With more than 100,000

apps available in the iPhone App Store and thousands

more offered on Google’s Android platform and on

RIM’s BlackBerry, it’s clear that apps are still front and

center when it comes to tantalizing smartphone owners.

After all, they’re inexpensive—still typically in the

99-cent realm—and offer both useful and fun functions

(ukulele app, anyone?). What’s not to love?

For loyalty marketers, apps clearly offer a simple,

straightforward way to connect with consumers using a

specific, relatively measurable goal. However, app

creation and deployment have also become highly

competitive, requiring development, maintenance,

updates and approvals—and the iPhone App Store is

littered with apps that have failed to find a loyal

audience. So brands should think carefully about entering

the app fray, says Nielsen's Rocha. “It all depends on

what demographic you appeal to and what your brand

statement is.”

At Wells Fargo, making sure an iPhone app offered

something useful and convenient—in its case, finding

a local branch or ATM—was key for its busy customers.

“The location sensitivity of our app—if you’re looking

for a branch—is one of the things that's unique about

mobile in terms of creating additional convenience

and immediacy,” says Arah Erickson.

The idea is to increase customer loyalty by

giving customers what they want, when they

want it and how they want it—and mobile

offers an enticing way to do just that.

Experts predict that the apps of today will eventually

transform into highly-personalized, location-based

versions in which the consumer, on an opt-in basis,

provides more information so the application can be

more relevant – obviously a key factor in getting loyalty

marketers to invest. “The application could know what

kind of merchandise you want to buy, which restaurants

you like to dine at, or which friends you like to have

lunch with, and provide you with relevant information,”

says Gartner's Baker. “Then, as the apps get more

intelligent, they’ll get more proactive and make the

consumer aware of all the resources available in the

local area they’re in.”

2. Mobile commerce will awaken. Today’s customer

wants to shop when, where and how he/she wants—and

making that happen is a key ingredient in increasing

customer loyalty in the retail space. So it’s no surprise

that more than 100 of today’s top retailers currently have

mobile commerce websites, including Toys ’R’ Us,

Sears, American Eagle, Victoria's Secret and Best Buy.

For now, however, experts say today's consumers are

using their mobile devices mostly as a shopping tool

rather than a buying tool—researching prices, comparing

models and reading reviews.

www.colloquy.com

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C O L L O Q U Y / Volume 18, Issue 1, 2010

Optimus Primed

15.2

10.3%

18.9

12%

“They may research pricing, but it’s likely that they will

complete the transaction in the store,” says Gartner’s

Baker. “So the phone is primarily to supplement the

shopping activity as it stands right now.”

According to an annual survey conducted last year by

Deloitte, one in five shoppers said they intended to use

their cell phones to shop over the 2009 holiday season—

45% to research prices, 32% to find coupons or read

reviews, and 25% to make purchases.

But over the next few years, expect mobile commerce to

explode as more and more people become comfortable

with the notion and payment processes evolve, predicts

Gerry Purdy. “Mobile commerce overall is becoming

big enough that it's being broken down into sectors,

including mobile purchasing, mobile payments and

mobile transfers,” he says. “As it becomes socially

acceptable, combined with the increase of market

share and right applications, mobile commerce will

become mainstream—certainly within the next three

to five years.”

3. The virtual wallet is creaking open. Loyalty

marketers are chomping at the bit for the right mobile

payment solution—which makes sense, as loyalty

programs search for the right system to keep track of

points and rewards; retailers and manufacturers look to

send more promotions and offers right to a customer’s

mobile device; and consumers ratchet up their demand

for more and more convenience and ease-of-use.

And beyond shopping using the mobile web, the notion

of using the device as a virtual wallet or credit card

machine—to pay for and collect money for goods and

services—is also finally taking flight, thanks to emerging

Nielsen reports that the increase in high-quality smartphones and fast

affordable data led the growth of smartphone subscribership

by 119.1% from Q2 ’08 to Q3 ’09—which we see as a factor

that will prime public acceptance of mobile marketing

and business. (Smartphone subscriber numbers

are in millions; bubble size indicates the

percentage of penetration of smartphones

into the U.S. population.)

21.4

14.5%

24.2

16%

26.1

16.9%

33.3

Q2 08 Q3 09

18%

Source: Matrimonii pessimus verecundus oratori. Agricolae circu

technologies, and will be a key determinant in the

success of mobile commerce overall, say experts.

For example, some options currently in beta-testing

include credit card readers that allow small and mediumsized

businesses to collect payments using iPhones

or other smartphones—including a venture called

SQUARE, launched by one of the founders of Twitter;

as well as the PAYware mobile secure card reader

launched in partnership by VeriFone and First Data.

Another example: ViVOtech has installed hundreds of

thousands of near field communications (NFC) credit

and debit card readers in most major outlets to help

retailers deploy mobile loyalty and promotional

programs. These devices read the company’s contactless

sticker technology attached to a person’s mobile device,

enabling brands to offer coupons, promotions or

loyalty program-related offers. Other companies are

working on perfecting 2D barcode options, in which a

barcode is downloaded onto a phone through an

application, for instance, or a photo is taken of the

code. Such options allow consumers to pay with a

swipe of their smartphone screen—sometimes not

delivering consistent experience.

“To make the mobile phone a day-to-day payment device,

you need NFC technology to connect that mobile phone

to the point of sale directly,” says ViVOtech’s Mohammad

Khan. “There is a demand for something of such highvalue,

but you need something that is going to become

mainstream.”

In the future, phones already loaded with NFC capabilities

can be expected, says Dr. Purdy, and issues surrounding

uniformity of barcodes and other emerging options will

hopefully be smoothed out. “That will make purchasing

through retail more convenient and faster,” he says.

“Consumers won’t have to take any card out of their

pocket or purse to complete the transaction.”

4. The mobile coupon craze may have staying power.

Mobile coupons have continued on a rapid expansion

course over the past year, as brands look to increase

customer loyalty during the ongoing recession. Brands

such as Starbucks, JCPenney and Domino’s Pizza have

seen success in this area, and experts expect the category

to boom, both on traditional phones as well as

smartphones—particularly as consumers increasingly

begin to view mobile coupons as an alternative value

proposition to points and straight discounts.

“People are increasingly using their mobile device to

find incentives and offers and ways to save money

and get product information,” says Bruce Pryor at

Zavers, which also works with such companies as

Unilever and Gatorade to offer mobile coupons


downloadable from a web-based platform as well as

through 2D barcode technologies.

“Over half of a shopper’s decisions are made in the

store,” Pryor says. “Mobile is the technology that

enables retailers and manufacturers to influence that

at the point of decision.”

In the future, mobile-based coupons are expected to be

strongly tied to mobile search and opt-in locationbased

services, experts say, while cautioning that fraud

and code-copying will be challenges marketers and

technology providers will have to overcome down the

road—if, for instance, a code that gives a discount to

everyone, no matter their degree of loyalty, gets generally

circulated.

5. The future is location, location, location. For

marketers concerned about offering personalized,

relevant communication leading to increased loyalty,

targeting consumers based on their location is where

the future lies. Of course, the idea that a marketer

could target you based on where you’re walking down

the street may still seem a bit too “Big Brother” for

comfort. However, with proper opt-in offerings

combined with a smartphone’s GPS capabilities,

consumers and loyalty marketers will both benefit

down the line, say experts.

“The fact that these devices increasingly will have GPS

capability and be able to leverage location as part of the

portfolio of information makes these applications very

compelling,” says Gartner's Van Baker, who adds that

location-based services will become increasingly valuable

over the next few years.

For Wells Fargo's Arah Erickson, location sensitivity

offers a way to leverage the “native functionality” of the

phone, creating an even more simplified experience

for the customer. “It also offers future marketing

opportunities,” she says.

Red-carpet premiere

With such transformational promise yet to be tapped, it

may be tempting to rush Optimus Prime’s Roller into full

throttle, investing heavily now in hopes of a blockbuster

payoff as big as the multi-platform franchise that

the Transformer toy line has become. However, at

COLLOQUY we believe three elements must be in place

before you take a big step in this direction:

• Clear value: Because mobile is an intensely

personal channel, you must ensure that customers

can fully understand the value in allowing you to

communicate with them. In other words, you

must be crystal-clear about what's in it for the

consumer.

Santa's Little Helper: Mobile Edition

Deloitte's 24th Annual Holiday Survey (2009) of retail spending and trends

noted that 19% of consumers planned to use mobile phones—“another

emerging digital tool”—to help with holiday shopping, a 111% increase

over Deloitte’s 2008. And how did Santa's mobile helper assist?

Find store locations

Research prices

Access product information

Get discounts/coupons

Consult reviews

Make purchases

25%

32%

31%

40%

Source: 24th Annual Holiday Survey of retail spending and trends, Deloitte, 2009

• Customer control: Employ straightforward means

for customers to opt in and opt out of mobile

marketing, or risk immediate user turnoff. Enable

customers to easily set or change communications

preferences.

• Personalization: Mobile loyalty marketing is not

the place for mass messaging and irrelevant offers.

You must employ data and analytics to ensure that

you send personalized and relevant messages, such

as alerting customers when a recent purchase has

garnered them enough points for a reward.

The good news is that because loyalty operators already

enjoy two-way customer relationships and value

exchanges that lend themselves to engaging customers

via mobile, leaders in the loyalty field may have an edge

over other marketers in terms of mobile adoption. Still,

marketing within the transforming telecom sector

requires patience as technologies meant to boost mobile’s

value as a loyalty tool continue to be tested and improved.

For loyalty marketers, that means sticking it out for the

long haul as the mobile space transforms and evolves.

At Walgreens, abandoning mobile and the promise of

smartphones is not an option, says Tim McCauley.

“We’re not going to just take short-term steps as we’re

considering mobile,” he says. “This is long-term

planning, because this is not something that’s going to go

away. This is the next big challenge for our company.”

Sharon M. Goldman is COLLOQUY Senior Editor. For more on smart use

of smartphones in marketing, visit www.colloquy.com/transformers

45%

www.colloquy.com

55%

With such transformational promise yet to be tapped,

it may be tempting to rush Optimus Prime’s Roller into full

throttle, investing heavily now in hopes of a blockbuster

payoff as big as the multi-platform franchise that the

Transformer toy line has become. However . . .

17


18

C O L L O Q U Y / Volume 18, Issue 1, 2010

S T R A T E G Y R E P O R T

The Perils of Pauline

The pitfalls of relying solely on “persona-marketing” segmentation

THEATRICAL PLAY PROGRAMS OFTEN start

with a section called “Dramatis

Personae,” listing the production’s

characters and describing each in

broad, thin brushstrokes. As the play

progresses, the dramatis personae

reveal to observers the depth of their

characters through their actions.

So it is—or as it should be—with the

“persona” marketing strategy that

surfaced in retail some years back

and is still employed with varying

degrees of success today. In the

persona strategy, marketers create

distinct customer profiles of typical

customers, outlining such factors

as their product preferences, the

needs and aspirations that drive

those preferences, their shopping

habits, their income ranges, their

genders, and generalizations of other

B Y C O L L E E N B E C K E R A N D D A N R I B O L Z I

pertinent factors affecting their

buying decisions with specific

retailers. Personas are even given a

first name to make them, well, more

personable. “Pauline” is an

enterprising businessperson, for

example, driven by frugality and a

do-it-yourself attitude. “Marvin” is

a corporate manager, with a bit more

budget flex, enabling him to seek

complete end-to-end solutions.

Personas were developed by

companies pioneering the

transformation from productcentricity

to customer-centricity.

Personas provided a natural, simple

approach to segmentation, customer

identification, and relevance in

response to a lack of customer

information or a limited view into

existing data. Consider, for instance,

a specialty retailer lacking a way to

identify customers and tie them to

specific purchases—the sort of datagathering

capability that a loyalty

program provides. These pioneers

leveraged this basic demographic

segmentation to rally the organization

around the customer from the

perspective of merchandising, store

operations, communications,

marketing, and so on.

A primary strength of personas lies

in breathing life into segmentation.

They enable you to begin painting a

picture of who your customer is,

particularly for those who aren’t used

to dealing in consumer research.

The downside of such picture

painting is the corner you can paint

yourself into. Personas can put a

human face on the customer, but they

can also serve as a disguising mask.

Since its introduction, persona

marketing in general has evolved

significantly. The pioneers launched

their personas with a test-and-tweak

approach, and based on their

learnings have adjusted how they

focus on and deliver customer

solutions. Other companies, after

discovering the drawbacks of

depending only on personas, began

integrating other methods of

developing customer views. Still

other customer-centricity pioneers

took two parallel paths from the

very start, developing personas and

launching a loyalty strategy.

Act I

In large part, such evolution was

necessary because relying only on

personas presents a number of

inherent dangers, among them

potentially creating stereotypes as

one-dimensional as silent movie

heroine Pauline, whose melo -

dramatic perils were portrayed in

early 1900s’ movie serials. Among

other persona perils:

Overlooking or discounting

individuals or entire segments.

Many loyal customers simply don’t

fit into broad personality-based


segments, no matter how inclusive

they seek to be. And at the extreme,

personas can be outright exclusionary.

A home improvement chain, for

instance, can’t risk building only

male personas while ignoring a

significant audience of female doit-yourselfers.

And even including

female personas discounts the fact

that based on project needs, a Pauline

might actually have more in common

with an Eric.

Directed irrelevance. Suppose a

persona defines George as a wellto-do

customer. Employees would

then comfortably pitch higher-end

products even though the George

they’re speaking with has a

considerably smaller budget but

the same product needs. Such

variations aren’t necessarily easy

to pick out, and lead to knowing

the customer less, not more.

Inflexibility. Personas are good

lay tools for communicating

segmentation to those employees

who are unaccustomed to customer

research, yet those same employees

are also unaccustomed to flexible

reactions to that research. Those

most receptive to persona views into

the customer base won’t be open

to quarterly adjustments to persona

definitions. Cindy in Q1 can’t evolve

into Sandy in Q2 and Sally in Q3.

Therefore, persona segmentation

requires stable, long-term

commitment, which can further limit

the customer approach.

Missed opportunities. Relying on

personas and their lack of specificity

can blind you to the potential range

of segmentation that you might

employ. For some marketers, such

simplified segmentation is the

easy way out, a crutch to fall back

on without having to do the hard

work of building richer insights.

You can’t just presume that because

customers can be logically bucketed

into a certain segment that the

seg mentation defines exactly who

they are and their precise needs.

You must look deeper.

Act II

That’s where the benefits of loyalty

marketing come in. Through such

marketing, you can identify

individuals, gather rich data and

insights, and speak to customers

more relevantly than you can with

broad demographic segmentation.

You can learn and analyze what they

purchase, and engage in dialogue

that reveals specific preferences and

needs.

Armed with that information, you

can categorize customers based on

VAP segmentation: Value, Attrition

Risk, Potential Value. Such insight

allows you to allocate marketing

funds based on customers’ current

value and where you see the potential

for driving incremental sales. As

well, VAP segmentation guides the

allocation of resources devoted to

program member benefits, bonus

offers, and tiering strategies, and

ultimately contributes to campaign

modeling.

It’s at this point that we can begin to

layer on additional segmentation,

such as category segments, lifestyle

segments . . . and personas, if you

carefully balance their use with

that of other marketing mechanisms.

From a store operations perspective,

for instance, the personas offer

a simple vehicle for speaking with

different types of customers

more relevantly about products

they might be interested in. But

on a merchandising level, you

must look at the in-store product

mix down to the SKU level, perhaps

adjusting value propositions,

services, and breadth and depth

of product selection from store

to store based on location, sales

and then the local customer

demographic.

All this comes down to the

transactional data that provides

specificity and insight that personas

can’t provide. For instance, consider

a customer who has visited your store

twice a month for the previous year,

yet hasn’t made a purchase in the

previous two months. This

behavioral evidence reveals

attrition risk—this customer

may be starting to shop a

competitor. A view based

Personas can put a face not only on the customer

but also on the customer strategy itself, bringing the

very idea of segmentation alive for internal audiences.

A persona is almost like a branding tool.

It’s not so much a segmentation approach

as it is a way to skin your segmentation.

purely on persona

can’t reveal that risk.

Act III

Still, the philosophy of the persona

with its customer-centric view and

focus on demographic, lifestyle and

motivations can have a number of

advantages. Among them:

A place to start. A limited customer

view is better than no customer

view at all. Defining personas is the

potential first step in establishing a

customer-centric corporate mindset

and in giving associates a better view

into the types of customers who shop

your stores, and into their different

needs. But with that start, you must

work to evolve your segmentation

and leverage the actual transactional

data.

Visualization of customercentricity.

Personas can put a face

not only on the customer but also on

the customer strategy itself, bringing

the very idea of segmentation

alive for internal audiences. In our

experience, we’ve seen persona

development employed in effective

internal storytelling, giving those

in charge of developing customer

insights a tool for describing the

segmentation strategy to stakeholders

from the CEO to the front-line

www.colloquy.com

19


20

C O L L O Q U Y / Volume 18, Issue 1, 2010

cashier. A persona is almost like a

branding tool. It’s not so much a

segmentation approach as it is a way

to skin your segmentation.

Visualization for external

corporate communications.

Putting a persona skin on a

segmentation strategy has proven

to be extremely effective with Wall

For some marketers, such

simplified segmentation

is the easy way out,

a crutch to fall back

on without having

to do the hard

work of building

richer insights.

Street analysts, investors and the

press. Helping these audiences

understand such long-term strategies

using items in the traditional

financial toolbox can be a struggle.

A non-marketing segmentation

language. When soliciting feedback

from other departments and from

the field, personas can help nonmarketers

get their arms around

the segments conversationally,

facilitating more real-world analysis.

When speaking with front-liners, it’s

easier for them to visualize, consider

and provide feedback about Pauline

and George than it is to do the

same for Segment 3 and Segment

6. Besides, it’s easier for frontliners

to champion people than to

champion unnamed denizens of 2x2

Quadrant 3. From that perspective,

you might look at personas as kind

of a segmentational language, giving

segmentation a little more enterprise

power and accessibility to draw

people into a total effort.

A guide to customer

communication styles and

approaches. Personas can guide the

tone and manner of communica -

tions, but can’t dictate the specific

content or offers within. Assuming

that an offer is relevant to customers

because they fit into a persona box

is very risky versus triggered

com muni ca tions based on actual

behavior. The customer might be

Pauline or George or Henry, but

any one of them who buys, say, a

flat-screen TV will very likely be

receptive to an offer for DVDs

or an HDVD player. Loyalty and

relevance must flow from the

transactional data and preference

information you’ve collected from

specific customers, and savvy

loyalty marketers must ensure that

the personas don’t get in the way

of more-relevant customer

conversations.

Additional perspective and

opportunity. Different customer

views through alternate or secondary

segmentation can inform your

approach to the primary

segmentation—and vice versa,

with the possibility of transactional

analytics and segmentation

identifying new personas, and the

personas them selves fueling ways

to interpret and respond to

transactional patterns. Persona

development instills input and

insights, but you can’t develop a

strategy solely around personas.

Happy endings

When personas first took the stage,

companies organized entire

marketing, merchandising and

advertising teams around these

specific demographic segments.

But as we’ve watched the Dramatis

Personae, so broadly sketched in

those early days, perform upon the

transactional stage, we’ve learned

about the depth of their interests

from the range of their actions. By

continuing to evolve our customercentric

strategies, carefully layering

various demographic and lifestyle

views into customers onto core

transactional data, we can create

rich customer perspectives, and

rescue Pauline from the perils of

personas.

Colleen Becker and Dan Ribolzi are

LoyaltyOne consultants. “Colleen”

and “Dan” are their real names.

Oscar Ceremonies

Continued from page 8

card can immediately be used for

10% off concession items, in the

process beginning to earn points

toward future redemptions.

Engagement is immediate. Simplicity

of operation and immediate rewards

have been among “the absolute keys

to our success,” says Dan McGrath.

Continued customer close-ups.

SCENE regularly turns to the

membership for program feedback—

about what kind of rewards members

want, for example. “That kind of

research has been very helpful to

drive our decisions in adding

rewards,” McGrath says, pointing

out that after the first year and a half

of program operation, member

feedback made clear an interest in

earning DVD rewards. “Cineplex was

getting into that space of launching

a DVD store, so that fit very well.”

Coming attractions. There are plans

to launch mobile apps in 2010—one

for Cineplex, one for Scotiabank and

one for the mutual SCENE program—

with collaboration across the

development groups. “We want to

make sure as each company builds

their mobile app that we’re not

missing out on any opportunities to

do things together,” says McCabe.

End credits

Scotiabank and Cineplex deeply

appreciate the lesson taught by the

successful partnership that gave

birth to SCENE, says Dan McGrath:

Co-stars with equal billing can lead

to Oscar-winning performance. “I

never would have thought in a million

years that a bank would have been a

good partner for our loyalty program,

but it shows that just because you’re

in two very divergent types of

business doesn’t mean that there isn’t

an opportunity to work together.”

Just don’t expect to see a Lemmon-

Matthau Odd Couple marathon as a

redemption option anytime soon.


"The best way to predict the future is to invent it."

–Alan Kay

COLLOQUY can see what’s in your future: deep understanding

of your customers’ needs to drive engagement, reduce attrition,

build lifetime value, and foster satisfying customer relationships.

And COLLOQUY has the tools to help you invent that future:

proven techniques to build predictive data analysis, best-customer

segmentation and targeted loyalty communications. It’s a future

that we’ve helped best-in-class companies envision again and

again, through our two-day COLLOQUY Loyalty Marketing

Workshops conducted with the Direct Marketing Association.

In our sessions, you’ll discover what it takes to develop effective

loyalty strategies that recognize, reward and profit from your

most valuable customers. Our insights, information, and planning

experience help you craft powerful programs based on

engagement, value exchange, and relevant customer dialogue.

The Loyalty Marketing Workshops provide targeted online

instruction to improve ROI and leverage loyalty-marketing best

www.colloquy.com/twitter www.colloquy.com/facebook www.colloquy.com/linkedin

practices. We offer a wealth of proven instruction in tailoring

communications, building lift, reducing attrition, and improving

profitability—backed by real-life examples from an array of

industries. Plus, practical exercises expand your skillset: You’ll

be assigned to a team to work a case study under the guidance

of our expert faculty, utilizing your new knowledge. Since 1999,

more than 1,000 executives have attended and profited from this

one-of-a-kind educational event.

Upcoming Loyalty Marketing Workshop:

DMA/COLLOQUY Loyalty Marketing Workshop

May 4 – 5, 2010, DMA Seminar Center, New York

COLLOQUY faculty: Dan Ribolzi, Aline Ostrowski

To register: www.dmaloyalty.org

Lively sessions. Great information. And no need for tea leaves. We’ll see you there.

Timely. Opinionated. Essential.


22

C O L L O Q U Y / Volume 18, Issue 1, 2010

T R E N D S R E P O R T

Dear Prudence

Post-recession consumerism comes out to

play—as simple financial prudence shifts

to include the things customers hold dear

WE DON’T OFTEN THINK OF THE BEATLES

as financial prophets—their “Tax

Man” notwithstanding. In their

1968 song, “Dear Prudence,” the

Beatles invited the star of that

song to greet the new day, and

indeed, prudence has come out to

play. But it has arrived in a form

that marketers may not have

anticipated.

Call it prudence, frugality, thrift,

or austerity—whatever term you

choose to use, it’s clear that as we

greet a brand-new decade, the

wild spending of the pre-recession

seems like just a faint memory.

For today’s consumer, restraint

rules.

B Y S H A R O N M . G O L D M A N

As the unemployment rate continues

to hover around 10%, the rate of

personal savings is growing:

According to the U.S. Commerce

Department’s Bureau of Economic

Analysis, personal savings as a

percentage of disposable personal

income was 4.7% in November 2009,

while in 2006 that number included

a negative sign. While it’s no

comparison to the hefty savings stats

of the era of the Great Depression

and World War II, when personal

savings sat well in double-digit

territory for years, these days

consumers are certainly more

cautious about where their money

goes—and many believe those habits

have dug in for the long haul.

A recent poll from Citi found that a

significant majority of women with

children—about 75%—feel the

recession has changed their spending

and savings habits “forever.” And

survey research from Mintel shows

that many lifestyle changes made

as the recession began in 2008 are

holding steady—for example, in

October 2009, 67% of respondents

stated that they’re cooking more at

home to save money, and 64%

stated that they’re traveling less.

“It boils down to an issue surrounding

decision-making,” says Dr. Robert

Leone, professor of marketing at

Texas Christian University. “As things

change, many consumers begin to

rethink purchases and decisions that

had been instinctive.”

Loyalty marketers have hardly ignored

the drumbeat of consumers searching

for savings and value: Many are using

recession-friendly strategies to

increase loyalty among frugal folk,

such as grocery chain Safeway, which

offers a program in which club

members can virtually attach coupons

from websites such as CellFire and

Shortcuts.com to their accounts,

lowering their bills when a loyalty

card is swiped at checkout.

Other programs are offering double

and triple points to rev up consumer

reward power when spend is down,

including U.K. grocery powerhouse

Tesco, which is touting a double

Clubcard points program that will last

until this summer. Still other

companies are turning their focus

to loyal customers who are willing to

spend, such as Chase’s new Sapphire

card, which offers flexible rewards

and points that don’t expire.

Then there are the financial services

loyalty programs that specifically

encourage savings, pioneered by

Bank of America’s Keep the Change

initiative that rounds up debit

purchases, deposits the round-ups

into a savings account, and matches

the roundups within certain time and

dollar limits. The latest such initiative

is U.S. Bank’s pilot of S.T.A.R.T.,

which allows members to deposit

savings each time they use their

credit card, and to transfer FlexPerks

program rewards into savings each

month.

But understanding the core

motivations behind these

spending/saving shifts—and whether

these are long-term behavior changes

or just temporary deviations—is

essential as companies move beyond

simply surviving the downturn to

working toward investing in boosting

customer loyalty and attracting new

customers. After all, relying on

discounting and sales, the competition

strategy many retailers have fallen

back on, isn’t a long-term loyalty

solution if consumers won’t soon

return to their old spending ways.

That is, unless you are, at heart,

a discounter, such as Walmart or

Family Dollar, retailers that have

fared well in the down economy.

Instead, most marketers must devise

creative ways to target customers in

this new environment.

“The recession has really been a

trigger that affects the way consumers

are behaving,” says Lerzan Aksoy,

associate professor of marketing at

Fordham University and co-author

of Why Loyalty Matters. “And while

perhaps it is a pendulum that goes


ack and forth at times of economic

change, I think now people are

really reconsidering their values.

They’re thinking about what’s

really important to them.”

Some experts believe the motivation

of the “new frugality” goes beyond

the current financial and economic

crisis, and has led us to the beginning

of an intrinsic cultural change, as

consumers don’t work to simply

stretch their dollars, but to reevaluate

what fundamentally makes

them happy. Loyalty marketers, these

experts say, can use what they learn

about this new post-recession culture

to make sure their efforts are focusing

on what consumers want right

now and in the future—not what they

wanted when the recession began.

Dr. Robbie Blinkoff, a consumer

anthropologist and founder of

Context-Based Research Group,

which has worked with clients

such as American Express, Nike

and Procter & Gamble, believes

the new prudence is the beginning

of a cultural transformation:

“We’re going from the world being

defined by us as consumers to

the world being defined by us as

humans—and being a consumer is

just part of that.”

In a new quantitative version of

Context-Based Research Group’s

2008 study, Grounding the American

Dream: A Cultural Study on the Future

of Consumerism in a Changing

Economy, 43% of respondents said

they believe the recession has had

a positive impact on their lives—the

research suggests that Americans will

keep a tight grip on their pocketbooks

while they find enjoyment through

more meaningful, less purchasecentric

activities. For example, fourfifths

of respondents plan to spend

more time with family and friends

this year compared to recent years.

“I think people are realizing that

you can’t shop your way to

enlightenment,” says Blinkoff. “The

response to 9/11 was ‘shop,’ while the

response to the recession is ‘don’t

shop’—so now people are turning to

non-consumerism behavior because

people realize that the way to really

be happy is to connect with others.”

Blinkoff quickly points out that that

doesn’t mean people are going to

stop shopping—but they are going to

shop differently. “A big part of the

way we spend will be spending that

satisfies us socially—so it’s really

about evaluating your purchases in

terms of the social value it will bring

to you.”

Recent research from Mintel supports

this contention, particularly as it

applies to social spending at home

Loyalty “After the Meltdown”

And toward the post-recession consumer

If the post-recession consumer wants added value, a holistic approach and

a focus on relationships and experiences, then loyalty marketers clearly

have an important opportunity before them—as loyalty programs, by their

very nature, offer marketers an important way to fulfill those wants and needs.

In COLLOQUY’s recent white paper, After the Meltdown: Consumer Attitudes

and Perceptions About Loyalty Programs in the Post-Recession Economy, we found that U.S. consumers

continue to find value in rewards programs both as a way to stretch their budgets and to gain value-added

experiences and to build relationships with brands they want to engage with. Employing the right loyalty

offerings enables marketers to engage with current customers in a non-aggressive, personalized way that

appeals to today’s price-sensitive yet thoughtful consumer.

The good news is, despite the recession, overall consumer

participation in loyalty programs has jumped 19% in the

U.S. since 2007, and even higher when it comes to

Women at 29%, and Millennials (age 18-25) at 32%. And

despite the recession, over two-thirds of all U.S.

consumers report that they still participate actively in at

least one reward program.

One essential, say experts, is keeping things simple in

terms of earn and burn for consumers looking to stretch

their budgets. “It’s a matter of making it easy to rack up

points and making it easy to pay or finance a purchase,”

says Lerzan Aksoy, associate professor of marketing at

Fordham University.

In addition, focusing on providing value-added

experiences—whether a VIP pass, a special family

activity or a feel-good surprise—can take customers

beyond just points and discounts to a personalized

relationship with a brand.

“At the end of the day, you want people to say this is the

experience I got from this, as opposed to just their status

in terms of rewards points,” says Dr. Robbie Blinkoff. “It’s

a very different concept.”

Recession Impact: Importance of Rewards

Programs in Three Primary Verticals

32.3%

More

Important

42.7%

No

Difference

25.0%

Less

Important

Retail

• Source: 2009 COLLOQUY Loyalty Demographic Study, U.S. Results

• Q: Thinking of each type of reward program that you participate in,

how has the recession impacted your participation rate in each program?

• n = 1,323 (Retail); 1,131 (Financial Services); 963 (Travel)

No matter what marketers choose to offer through their loyalty program, the bottom line is demonstrating

the program’s value to a population that many experts say is moving beyond simply being more frugal and

thrifty, toward demanding increased value and usefulness in all the ways those concepts are now defined.

and online: More than 30% of survey

respondents said that entertainment

activities like watching movies at

home, cooking dinner, watching TV

and reading have become more

popular during the recession, while

more than 10% reported spending

“much more” or “somewhat more”

time on social networks and reading

blogs or researching online.

“These are all cheaper alternatives to

going out to dinner or to a bar, but

it’s also about when people actually

do make discretionary purchases,

says Chris Haack, Senior Analyst

at Mintel. “It has to be more

meaningful and viable.”

23.9%

More

Important

52.7%

No

Difference

23.4%

Less

Important

Financial Services

www.colloquy.com

21.5%

More

Important

43.0%

No

Difference

35.6%

Less

Important

Travel

23


24

C O L L O Q U Y / Volume 18, Issue 1, 2010

The Consumer Comes of Age

A Context-Based Research Group study finds that the recession is changing not only spending but also consumer

self-image with “the potential to maintain a healthy balance between our consumer and non-consumer sense of selves.”

Has taken steps to reduce spending this year 88%

Feels economic changes affected life positively 43%

Has made permanent changes in spending 83%

Seeking small treats for self and others 90%

Seeking luxury for less 62%

Spending has become more strategic 93%

Spending as much or more, but differently 43%

Loyalty marketers can take these

research results and make sure their

efforts, whether through a traditional

loyalty program or through other

enterprise loyalty tactics, line up with

the statistics. After all, according to

Fordham University’s Lerzan Aksoy,

brand loyalty is already facing

challenges as price-challenged

customers consider switching to more

affordable brands. But in addition,

these statistics also shine a light

on the consumer shift from simply

acquiring tangible things to focusing

on experiences—spending a larger

portion of dwindling dollars on

experiences that can be enjoyed with

other people.

Making experiences attainable

Loyalty marketers who can strate -

gically respond to this new consumer

focus on experiences may find

renewed success and increased

loyalty, Aksoy says. “For example, a

drinks manufacturer recently came

up with displays to teach people to

mix cocktails at home rather than

go out to a bar,” she says. “Instead

of reducing their prices, they were

able to market in a way that helped

preserve their customer’s standard

of life at an affordable price.”

Robert Leone points out that loyalty

programs that offer a special

experience or something beyond a

discount makes people believe they

are getting more bang for their buck

as they choose their purchases wisely

and carefully. “They’re stretching and

shifting their choice sets—so, for

• Source: Coming of Age in the Great Recession: A Grounded Consumer Followup,

Carton Donofrio Partners, Context-Based Research Group

• Survey participants: 1,000 U.S. adults nationwide (age 18+); sample balanced to

ensure gender, income, race, age, and region representation

example, they might pick a different

family vacation if one offers some

value-added component.”

If not a family vacation, then maybe

a chance to win a professional family

photo, as offered by the Huggies’

Enjoy the Ride program. Or something

personally fulfilling like private

cooking lessons or thrilling like the

“fighter pilot experience” offered by

the choiceprivileges program from

Choice Hotels. Or something relaxing,

as simple as Optimum Rewards’ “Meal

and a Movie” discounts to share with

a loved one.

For Robbie Blinkoff, the new

thinking is all about the ‘grounded

consumer’—who is more strategic

and more thoughtful, who thinks

about the social and the emotional

as well as the rational point of

purchasing. “They think about Value

with a capital V,” he says. “This is

definitely a post-recession

consumer—83% of the consumers

we studied said they are spending

differently, really thinking through

their purchases. Even if some of those

people are saying one thing and will

behave differently, it’s still a big

difference. What may come out of this

a couple of years from now is that

people will be spending a lot of money

but on less stuff, because they’ll have

a very clear sense of what products

they want in their life.”

The products and services consumers

will welcome, say experts, certainly

depend on a company’s category,

its target audience, and its customers’

level of price sensitivity. However,

experts say offers also require new

thinking by loyalty marketers as they

negotiate a changing consumer

mindset.

“You have to think holistically about

your customer offering,” says Leone.

“Even as we move toward an upswing,

people have changed the way they

think—they have learned that there

is value in reconsidering and

reevaluating what they purchase.”

Because brand stickiness can no

longer be counted on, marketers must

offer a strong motivator to buy, he

says, whether an economic motivator

such as double points, lower prices or

delivery options, or a psychological

motivator, such as a sense of

experiential value when redeeming

rewards.

The crux of all this, explains Blinkoff,

is that the new post-recession

consumer doesn’t think of himself

or herself as one, requiring a new

approach from marketers of all

stripes. “We believe retailers must

gently nurture customers rather

than aggressively targeting them as

they may have in past years,” he

says. “To see the world right now

through a marketer’s eyes with

only those lenses is a professional

problem right now.”

Sharon M. Goldman is Senior Editor,

COLLOQUY. We didn’t pay her salary for the

time she spent writing this article. It’s the

new frugality, after all.


“Ourqualitativedataandvendoranalysisshows

Smart Button’s loyalty offering is robust and

configurable for several retail, entertainment

andotherserviceindustryenvironments.

Smart Button’s solution has an effective workflow

involving all the elements of a loyalty program:

planning, implementation, evaluation and analysis.”

Sahir Anand

Research Director—Retail Group

Aberdeen Group

Market Smart. Build Loyalty. Increase Sales.

Turn your data into a business advantage. The Smart Button Loyalty Platform delivers significant benefits

to your organization by providing you with the tools needed to create long-term, interactive, value-added

relationships with your patrons.

• Bulk Email Capabilities

• CRM Functions

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• Flexible Points Engine

• Online Rewards Store

• Analytics

• Web Site Portal

• Product Code Promotions

• Choice Words & Phrases Promotions

• Web Service Interfaces

• Multiple Rewards Capabilities

• Client-Driven Blog

• Message Boards

• Promotions

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• POS Promotions

Experience a new approach to loyalty and rewards.

smartbutton.com 800.611.2265 302.283.0200


26

C O L L O Q U Y / Volume 18, Issue 1, 2010

I N T E R N A T I O N A L R E P O R T

The Promise of India

As it faces new possibilities and tough challenges, India appears primed to

step up its loyalty game

TO GET A SENSE OF THE INTENSITY of

the surging Indian marketplace,

picture people—me among them—

queued up in a winding Disneylike

line just to get into a Mumbai

hypermarket called the Big Bazaar.

Inside, I find customer chaos, with

every crammed aisle featuring

Kmart-like “blue-light” specials

announced by hawkers shouting

into megaphones. Some of these

hawkers occasionally climb up

the merchandise pallets to run

contests and games to help move

their wares. Meanwhile outside,

where the lines of people awaiting

entry curl through the open-air

marketplace, vendors in tiny stalls

go about their business, talking

and haggling with customers just

as they have done for centuries–

all without a megaphone.

B Y K E L L Y H L A V I N K A

Getty Images/Robert Harding World Imagery

Such contrast is typical of India, a vast

country of 1.15 billion people with a

relatively small percentage of middleand

upper-class citizens on one

extreme and a significant portion of

its population still living in grind ing

poverty on the other. It’s a modern

country with a growing economy

and a reputation as an informationtechnology

superpower, yet over 30%

of the population remains illiterate.

And, only about a quarter of its

population lives in urban areas; the

rest live in small, rural villages with

little access to technology.

My recent stay in Mumbai illumi -

nated how these contrasts affect

the burgeoning loyalty industry in

this country. And, I learned even

more during the conference I had

journeyed to attend: India’s Loyalty

Summit 2010. Economic and cultural

contrasts provide specific challenges

to loyalty marketing in this fastchanging

part of the world, and they

form a vivid metaphor for the

evolution of loyalty marketing itself:

Promising opportunities abound,

from proprietary formats in the

growing retail vertical to budding

coalition programs across industries,

which have sparked an infectious

entrepreneurial energy among those

working in the industry.

At the Summit, I heard amazing

stories of new technology startups,

new analytical capabilities, and new

program ventures that have recently

launched from more than a dozen

Indian companies. Yet, serious

challenges must be overcome if

India’s loyalty marketing industry

wants to take its efforts to the next

level.

“The loyalty market in India is in a

very early stage of maturity right now,

but it’s maturing rather rapidly,” says

Bijaei Jayaraj, Founder and Chief

Executive Officer, Loylty Rewardz

Mngt Pvt Ltd., a loyalty rewards

program management company

that manages programs such as

FreedomRewardz, a debit card loyalty

program for State Bank Group

customers with more than 69 million

members, and WorldMiles, an airlineindependent

frequent-flyer program

for Deutsche Bank Visa Platinum

and Signature credit card customers.

That maturity is partly due to a

growing infrastructure in organized

retail, a growing use of media such

as mobile, and growing prosperity

within the population, says Praphul

Misra, CEO of NetCarrots Loyalty

Services, which runs customer loyalty

programs, employee incentive and

reward programs, and dealer/channel

incentive programs. “With the

growing prosperity, suddenly there’s

a whole new consuming class, much

like consumers around the globe—so

that creates a fantastic opportunity

from a loyalty perspective, depending

on which market you want to target.”


An ever-changing landscape

Though the India market is still

relatively unexploited, Jayaraj explains

that it is also becoming increasingly

complex and competitive as more

private equity pours into a growing

retail sector. “It’s becoming increas -

ingly important for organizations to

understand their customers in a

more systematic and professional

way,” he says. “India used to be made

up of small retailers or mom-andpop

shops where the shopkeepers

and customers knew each other

personally—by name, their father

and grandfather and family.” In

today’s growing marketplace, however,

as some retailers move toward

becoming national chains, knowing

customers individually becomes

impossible—and access to data and

data analysis becomes far more

important.

That’s where loyalty programs come

into play, says Vijay Bobba, Founding

CEO and Managing Director of

i-mint, a Mumbai-based coalition

loyalty rewards program launched in

2006 that now claims over 9 million

members, more than 2,000 network

partners and 3,000 points of pres -

ence. “For businesses, their interest

is in future access to customer data,”

he says. “And the only way you can

build customer data is to have

some kind of a loyalty program.”

As is fairly typical of most markets,

India’s earliest loyalty programs

were based in the travel and hotel

industries, and those verticals

remain strong as loyalty marketing

expands across the country. For

example, Brian Almeida, Group

Managing Director of Direxions, a

loyalty marketing and direct

marketing agency with offices in

Mumbai, Kolkata, Delhi and the U.S.,

says his company began by managing

programs such as the British Airways

Executive Club in South Asia, Jet

Airways’ JetPrivilege program, and the

Taj Inner Circle. Direxions today runs

India’s largest fuel program for

Bharat Petroleum (India’s second

largest oil retail company), a smartcard

program with over two million

members.

Today, more financial services

companies have integrated loyalty

into their offerings, and retailers

such as gasoline retailers, grocers and

department stores have developed

loyalty programs. “Three or four

years ago, the primary focus for

retailers was real estate,” Almeida

says. “Today, they are more focused

on how to acquire customers, how to

retain the customers, and what kind

of margin they need to be offering.”

Next-generation challenges

The next generation of loyalty

marketers and programs faces some

significant systemic challenges as

they seek to expand their efforts. For

example, despite its huge population,

only a small percentage of house -

holds make over USD$60,000

annually, limiting the number of

people able to regularly participate

in some kind of reward programs—

those who can afford, say, to fly on an

airline, stay at a hotel, or shop at a

more-expensive department store.

In addition, compared to the U.S.,

India’s consumers are savers; nearly

24% of their salaries are saved.

Combined with the fact that only

20% of India’s customers are

considered bankable, there’s not a

natural tracking mechanism on credit

and debit purchases for a vast

percentage of economic transactions.

Large retail formats, while seeing

growth, remain a small percentage

of India’s total retail landscape—

93-95% of retailers are typically

small convenience stores. The

national chains that could anchor

a partnership or coalition are, in

general, still evolving.

Finally, consumer awareness of

loyalty programs, explains Loylty

Rewardz’s Jayaraj, remains low.

However, awareness is increasing

as new loyalty programs spring up

regularly. “Given that this is a large

country, [program introductions]

are beginning to happen in a rapid

fashion, and people are beginning

to understand what this space is all

about,” he says.

Despite these issues, however, no

one should underestimate how

quickly India will catch up to markets

that have been running loyalty

programs for decades.

Firing up India’s loyalty future

The future of India’s loyalty industry

is bright, believes Direxions’

Almeida. “A lot of new technology is

coming in, with many new players

and more brand competitiveness,”

he says. “Those brands are going

to look at retention and loyalty

programs far more than they have

in the past.”

The prospect of partnerships and

expanded coalition programs, too,

hold a great deal of promise in India,

Economic and cultural contrasts provide specific challenges

to loyalty marketing in this fast-changing part of the world,

and they form a vivid metaphor for the evolution of loyalty

marketing itself: Promising opportunities abound.

say experts, since such business

models offer consumers a greater

value proposition and small- to midsized

businesses a way to increase

reach alongside national chains.

“I strongly believe that coalitions

appeal to the core of the Indian

psyche,” says Praphul Misra. “Indian

consumers are value conscious

customers, and if they are able to

generate value from across multiple

sectors of the purchase basket, from

fuel, to grocery to my telecom bill,

I think we are responsive to a value

proposition like that.”

Coalitions do face obstacles, of

course. “India is such a large

geographic area that it’s difficult

to get large national players that

have an equal presence across the

country,” says Almeida, which may

www.colloquy.com

27


28

C O L L O Q U Y / Volume 18, Issue 1, 2010

result in “a lot of partnerships or

coalition programs where a few

partners are national. We know of

at least five of the large industrial

houses that are evaluating coalition

loyalty programs across their product

and service lines.”

For i-mint, the idea of a coalition

program offered “an opportunity to

bring on hundreds and thousands of

small- to mid-sized merchants

who were willing to be part of the

network,” says Bobba. “But it also

became clear that unless we had

very large partners on Day 1 with a

reasonable national presence and

some kind of consolidation, we

would not even have a head start.”

There are other positive signs:

For example, data-gathering may

become easier if India’s Unique ID

project—a government initiative

in which every individual will be

assigned a personal identifier—

takes off at the end of 2010. “The

cleanliness, accessibility and integrity

of this data will become very positive

for the industry,” says Almeida.

And while for many Indian

companies, retention and cultivating

customer growth remain of low

priority, several forward-thinking

companies are already encouragingly

far along in adopting customercentric

strategies, including HSBC’s

Total Relationship program, Tommy

Hilfiger’s strong front-line

component featuring store “champs,”

and MyBonus, a pilot smart-card

coalition-like program with more

than 100,000 mom-and-pop stores

already signed up. As well, depart -

ment store Shoppers Stop’s First

Citizen program, with 1.5 million

active members, uses program

data from their most-profitable

customers to conduct significant

work in modifying store and shelf

layout and testing “communitybased”

messages and initiatives—

such as regional festival tie-ins—to

influence consumer behavior.

However, when it comes to customer

growth and the resulting expectations,

some experts include an advisory:

“I would caution them not to expect

too much in terms of loyalty being

Department store Shoppers Stop’s First Citizen program,

with 1.5 million active members, uses program data from

their most-profitable customers to conduct significant

work in modifying store and shelf layout and testing

“community-based” messages and initiatives.

the fix for driving growth,” says

NetCarrots’ Misra. “Loyalty may not

be able to be a panacea, but it will

probably give you insights which will

then help you sustain the growth.”

Still, it’s clear that those currently

in the Indian loyalty industry will

have an early-mover advantage. By

applying loyalty principles today,

companies will forge loyal customer

relationships before the battle for

share of customer becomes a crisis.

For Bijaei Jayaraj, that early-mover

advantage is essential as the

Indian market prepares for a

loyalty revolution. “The market is

undergoing a drastic change as

organizations begin to understand

the importance of maintaining a

quality database, understanding

their consumers’ behavior, and

developing the ability to reach out

to those consumers on a one-toone

basis,” he says. “It’s probably

a multi-billion dollar opportunity

given the size of the country and

the economy.”

And when it hits that figure, you’re

sure to hear about it—no need for a

megaphone.

COLLOQUY Partner and contributing editor

Kelly Hlavinka is a frequent speaker on the

subject of loyalty.

The voice of loyalty marketing since 1990

Partner: Kelly Hlavinka

Senior Editor: Sharon M. Goldman

Managing Editor: Bill Brohaugh

Online Editor: Josh Milner

Market Alert Editor: Joan Deno

Contributing Editors: Dennis Armbruster,

John Bartold, Colleen Becker, Bruce Kerr,

Andrew Mitchell, Aline Ostrowski, Dan

Ribolzi, Richard Schenker

Marketing Assistant: Denise Reuter

COLLOQUY Editorial Board:

• Tom Collinger, Chairman, Integrated

Marketing Communications Dept.,

Associate Dean, Medill School at

Northwestern University

• Stephanie Coyles, Chief Strategy Officer,

LoyaltyOne

• Dan Finkelman, SVP, Chief Marketing

Officer, Retail Services at Alliance Data

• Garret Ippolito, Vice President Global Key

Accounts, MasterCard Worldwide

• Kyle Murray, Director of the School of

Retailing and Associate Prof. of Marketing,

University of Alberta

• Bryan Pearson, President, LoyaltyOne

• Randy Petersen, Chairman and President,

InsideFlyer Magazine

• Aubyn Thomas, former Senior Vice

President, Marketing Services, Macy’s

• Mark Vandenbosch, Prof. of Marketing,

Richard Ivey School of Business,

University of Western Ontario

4445 Lake Forest Drive, Suite 200

Blue Ash, Ohio 45242

Telephone/Fax: +1.513.248.9184

Email: info@colloquy.com

www.colloquy.com

COLLOQUY ® is published by LoyaltyOne, a

global leader in developing and managing loyalty

marketing strategies that profitably change

customer behavior. Through a team of businesses,

each specializing in a distinct loyalty discipline,

LoyaltyOne designs, delivers and manages a

complete suite of loyalty marketing capabilities.

The companies include: LoyaltyOne Consulting,

practitioners with more than 25 years of experience

designing and implementing customer strategies

for Fortune 1000 clients • The AIR MILES ®

Reward Program, North America’s premier

coalition loyalty program • Direct Antidote, a

loyalty agency specializing in data-driven creative

campaigns designed to deliver measurable results

that inspire customer loyalty and return on

investment• Precima, an advanced analytics firm

that translates retail customer data into critical

insights to better align marketing, merchandising

and operations with shopper needs.

COLLOQUY is a trademark of Alliance Data Systems Corporation used

under license by LoyaltyOne, Inc., an Alliance Data company.

Issue © 2010, LoyaltyOne, Inc. All rights reserved. Permission to reprint

may be granted upon specific request.


www.colloquy.com/twitter www.colloquy.com/facebook www.colloquy.com/linkedin

Timely. Opinionated. Essential.


30

C O L L O Q U Y / Volume 18, Issue 1, 2010

A N A LY T I C S R E P O R T

The Profitably Engaged

Customer

An analytic guide to measuring and leveraging

the value of customer engagement

WHEN IT COMES TO THE CUSTOMER-BRAND

interactions known in the industry

as “customer engagement,” many

companies fixate on but one

interaction: the purchase. This

end-game engagement drives the

companies’ ultimate metrics,

including sales volume, market share,

and ROI. Such concentration on

bottom-line metrics, however,

overlooks the power of customer

engagements that lead to the

purchase, as well as the posttransaction

engagements that

define customer lifetime value.

Yet, engagement not only predicts

those bottom-line metrics but also

influences them. In our work with

companies in several verticals, my

team has shown that engagement

drives increased customer value,

B Y J O H N Y O U N G

opening the gateway to greater

sales, more significant share of

wallet, and higher customer

retention levels. And through their

Relationship Chain methodology,

my colleagues at COLLOQUY have

demonstrated that opening this

gateway is especially relevant to

organizations with loyalty programs

and their repertoire of multiple tools

for communicating, interacting,

and inviting involvement with

their members.

The impact of engagement is both

measurable and actionable. By better

understanding and increasing

engagement, marketers can costeffectively

drive lift in profit and

customer retention, as well as foster

other benefits. Employing tried-andtrue

statistical techniques to correlate

engagement with customer value

creates a framework for assessing

engagement’s influence and

importance, and for designing

initiatives and establishing budgets

appropriate to those assessments.

To best measure and leverage the

power of engagement, consider

employing this workflow:

Identify your significant points of

engagement. Inventory the various

engagement levers that might matter

to your business. These levers can

be numerous and diverse. Common

examples include:

• Email permission/opt-ins and

subsequent email activity,

including open and click rates

• Using a web-based optionpreference

center

• Reward redemption and other

loyalty-program activity

• Website activity, including

visits, pages visited,

information/application

downloads, recency, and

transactions

• Direct-mail response

• Call center interactions

• Survey participation and results,

including satisfaction and

recommendation ratings

• Social media interaction around

the brand—including on-line

communities and product

rating/review sites

• Referral activity

As you see, engagement encompasses

activity that can be measured both

quantitatively and qualitatively

through both online and offline

channels—understanding, of course,

that some activities are more directly

or easily measured than others.

Take stock of available customer

engagement data. Identify the

engagement data available from your

company’s data sources, including

the web, call centers, loyalty

platforms, POS systems, surveys,

social media platforms, and so on.

Identify data gaps and decide what

other data to acquire and, as

appropriate, to not acquire. Exercise

judgment and directional benefitcost

analysis to decide what missing

data is or is not necessary to your

analysis.

When taking stock, note that though

engagement typically carries a

positive connotation, to support

comprehensive decision-making

you must also gather and measure

instances of negative engagement,

including email unsubscribes,

complaints, uncomplimentary

product reviews, product returns,

and so on.

Build the quantitative framework.

To begin linking engagement and

return, build a baseline customer

value model to gauge customer

revenue potential and set marketinginvestment

levels if such a model

isn’t already in place. Value models—

typically regression-based—can

predict customer spending levels

over a future time period which may

vary, though one year is common.

Value models usually comprise two

stages. The stage-one model uses

logistic regression to estimate the

likelihood that customers will

purchase from the company over the

future time period. The stage-two


model uses linear regression to

estimate the amount of spending

over that period. Both model scores

are then combined or multiplied

to create a score that represents

the customers’ expected spending

with the company. For example, if

customer A has modeled likelihood

to purchase of 0.5 and modeled

spending of $200, then her expected

spending (or customer value) is $100.

Value models draw their inputs largely

from prior purchase behavior—

various measures of Recency,

Frequency and Monetary (RFM).

These data are usually available from

your company’s marketing database

or analytic data mart. In addition,

demographic data not already

available in the database is easily

overlaid on customer records and can

incrementally improve value model

scores.

Overlay the engagement

measurements. To the baseline

customer value model, add

engagement measures to quantify

their impact on customer value as

additional predictors of customer

spending. Having controlled or

accounted for the other determinants

of customer value in the baseline

model, the expanded model will

measure customer-value sensitivity

to changes in various engagement

levers. For example, overlaying

website visitation frequency over the

baseline customer model allows you to

correlate visit rates with customer

value, and quantify the value of

various levels of web engagement.

Such correlation is analogous to

the concept of elasticity of demand,

which links price changes to

consumption changes.

Apply the engagement learnings.

Couple relevant cost data with

engagement value measures to

calculate return on engagement

investment (ROEI). This intelligence

helps you more wisely allocate

marketing dollars to increasing

customer engagement by answering

A Measure of Engagement

A case study

A large hotel chain with a well-established loyalty program was struggling to maintain market share. Internal

data also indicated that the organization was not faring as well as desired on engagement measures such as

reward redemption, email penetration, and online activity.

The company wanted to gain a more comprehensive understanding of how well it was engaging with members

and the importance of engagement to its business results. Engagement data was combined with member

spending data to examine the correlation between various engagement metrics and member spending. An

engagement score—which measures the strength or depth of engagement—was constructed. Engagement

scores, when plotted against future spending, clearly showed the effect of increasing

engagement levels.

The results of the engagement modeling, as shown on the display easel

to your right with average spending increasing on the y-axis, and

engagement index increasing on the x-axis, revealed these

engagement drivers, in descending order of influence:

• Breadth of brand stays

• Award redemption

• Online activity

• Booking or adjusting a stay online

• Completing a post-stay or call-center survey

• Selection of a preferred points-earning partner

• Granting email permission

• Clicking on a received email

The relative influence or importance of the engagement drivers gave the

organization information it needed to begin to develop marketing strategies

and tactics to cost-effectively increase customer engagement.

—John Young

such practical questions as how much

to spend to encourage members

to redeem rewards or to set their

preferences in the customer

preference center.

And you can correlate engagement

activities with other profitable

engagements. As an example, if

program redeemers typically also

subscribe to your email newsletter,

and both groups show strong ROEI,

you can target email subscribers who

have not yet redeemed.

Future engagement

The engagement scorecard is an

excellent tool for tracking

engagement over time, and its view

into the relative importance of

engagement levers enables you to

adjust strategies if the levers change.

For example, declines in low-impact

engagement activities may be safely

ignored, while declines in highimpact

activities warrant immediate

attention. The models also allow you

to define what levels of change should

trigger your attention.

With the data in place, you can also

monitor engagement trends at

an individual level, by segmenting

customer groups based on their

overall scorecarded engagement

levels. Typically four engagement

segments are employed—for

instance, Low, Moderate, High,

Very High. Engagement trend data

augments existing attrition-warning

systems, enabling you to identify

customers migrating between

the engagement segments and

intervene when necessary—with

high-value customers exhibiting

declining engagement, for example.

Similarly, you can identify and

subsequently acknowl edge and

reward customers exhibiting

increasing engagement levels.

Continuously revisit engagement

and adjust your strategies as needed.

By measuring and acting on the value

of all elements of engagement, you

enrich and encourage the cycle of

customer interactions, helping you

reach that bottom-line engagement—

the purchase transaction—more

efficiently, and repeatedly.

John Young is Senior Vice President,

Strategic & Analytic Consulting Group,

Epsilon. For information on COLLOQUY’s

Relationship Chain model, visit

www.colloquy.com/engagement

www.colloquy.com

31


32

C O L L O Q U Y / Volume 18, Issue 1, 2010

C O M M U N I C A T I O N S C U R M U D G E O N

After the Rains

Strategic planting leads to

bountiful harvests

B Y B I L L B R O H A U G H

MY GRANDFATHER WAS A FARMER, and

learned his profession on both a

practical and an academic level. A

bit unusual for the time and for the

family, he attended the University

of Minnesota School of Agriculture,

and at one point he wrote an article

for his hometown Wisconsin

newspaper about what he learned.

I have a clipping of that early 1900s

article in which the senior William

Brohaugh described a concept he’d

studied: Crop rotation. Change the

crop planted in particular fields in

successive seasons to avoid wearing

out the soil.

I bring up this point as I clear my

email box of a fresh batch of emails

from a retailer I first transacted

with about two years ago. I get two or

three such emails every week, each

with some big offer of a discount,

a break on shipping, or an enticing

package of related items at a group

price. They’re great offers. I think.

At least they were at the time that I

stopped paying attention to them.

Marketers and communicators have

a couple of things to learn from the

profession of my ancestral name -

sake. Crop rotation was adopted in

the agricultural world to combat

resource depletion. Planting only

one crop over the years sucks the

same nutrients from the soil,

ultimately weakening the ground

below, sapping production and

speed ing erosion. In fact, lack of

such rotation likely contributed to

creating the Dust Bowl of the 1930s.

To that retailer, I am such a figurative

dust bowl; the sales have dried up.

After my first couple of transactions,

the retailer began planting the seeds

of future sales with the same types of

offers over and over again, seemingly

at random. And then the rains came,

email upon email in a determinedly

erosive wash.

This retailer could have prevented

eroding previously fertile soil by

changing the offers, based on my

interests and preferences—the sort

of information that loyalty programs

deliver so efficiently. Such offers

might have been related to

transaction-data analysis, though

I’ve seen no communication that

clearly reflects such data points as the

category of my initial orders or the

timing of the orders.

Or the offers might have been tied

to my preferences or motivations

gathered from me directly. Relevant

and enriching offers can be cultivated

with what we at COLLOQUY call

“drip dialogue.” Quick and simple

questions in emails or during

website interactions, posed one at

a time, can build an actionable data

foundation for future freshness. Ask

specifically about category or brand

preferences to allow you to discuss

what your customers want to hear

about. Ask about planned projects

or activities to allow you to tell your

customers how you can help them

accomplish their goals. Or ask

something as simple as a birth date,

so you can not only offer annual

celebrations but also extend offers

that help customers deal with or enjoy

major life-stage changes.

My grandfather would cheer the

kind of gentle drip of informational

nutrients that allow marketers to

reinvigorate customer engagement

in these ways:

Rotate the crops. Make a range of

offers based on preferences and

needs revealed by transactional data

and continual dialogue. Vary the

content of offers rather than the offer

type for greatest effectiveness. In the

emails I’m clearing out, for example,

I see offers of 60% off one day

and free shipping plus 30% off two

days later. That’s not crop rotation,

that’s propeller blade rotation.

Plant in season. Key your offers

to your customers’ personal seasons,

which can take the form of purchase

cycles (especially if offering

consumables or renewable items),

life stages (related to age groups,

family status, and so on), and

seasons, holidays and events. In

any of these cases, don’t try to slap

relevance on haphazardly by slipping

into clichés or forced connections

(“Celebrate St. Patrick’s Day with a

lovely bunch of coconuts!”).

Don’t try to slap relevance on haphazardly by slipping

into clichés or forced connections (“Celebrate St.

Patrick’s Day with a lovely bunch of coconuts!”).

Give the soil a rest. Three emails a

week makes me feel like I’m standing

in a field of unwanted weeds rather

than in a comfortable country garden.

Let the customer step back from

your offers with appropriate spacing.

On the other hand, test frequency—

perhaps three emails a week deliver

pure profit for this retailer. Still, I

would hope that my lack of response

to the deluge would land me in a

segment that the marketers target

with other tactics to quicken my

return, engaging me in the very sort

of nutrient dialogue I’ve just

described.

As grandpa might say, keep your

customer engagement fresh with

that new-fangled crop rotation,

and nurture it with gentle rains,

one drop at a time.

Bill Brohaugh is COLLOQUY managing editor.


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