The Smarter Approach To Marketing

Just saw a news story on Ad Age. It is titled “Will Retailers or Consumers Come Out on Top on Black Friday?” The story references how Sears, Kmart and other retailers have begun holiday sales ahead of time as shoppers start early, searching for deals. According to Ad Age, Black Friday 2009 has become a massive game of chicken among retailers and consumers, as the closely watched post-Thanksgiving sales data will largely decide which succeeds at outsmarting the other.

Is this the right attitude?

As marketers, are we really trying to outsmart our customers?

If we are customer-centric, we would not be trying to one-up each other, but would focus our efforts on helping our customers solve their needs with relevant and differentiated offers.

As I defined in one of my earlier posts, providing value to customers by fulfilling their specific needs (relevance), recognizing their unique contribution to the business (recognition) and rewarding them with specific offers (reward) will create a win-win proposition. I defined the equation as 2RL + 2RC + RW = CL.

By doing this, the customer gets what they need from the brand and the brand gets the transactions that add strength to the business while building value in the relationship.

It is not about being smarter than them. It is about serving them well.

A simple idea. One that works

A Simple Equation for Loyalty Marketing

This economic environment is encouraging marketers to focus on shifting their spend from traditional acquisition marketing to efforts that generate value from their existing customers. The marketing paradigm is clear – it costs significantly less to retain an existing customer versus trying to acquire a new (and reluctant) one.

This issue is leading to many conversations about developing and executing loyalty programs. However, based on the quality of the discussions with companies across multiple categories, I see a significant level of misunderstanding. There is a lack of clarity about the role of loyalty programs as well as the components that make up a successful loyalty program.

Let’s first tackle the role issue. In my opinion, the most important role of a loyalty program is to engage with the brand’s core customer group and learn how it can best serve their needs. Brands need to serve these customers in a completely differentiated manner from its competitive set. Marketing applications are just the tip of the iceberg. The knowledge and insight gained from customer behaviors should be used to improve their experience with the brand. The end result is to have these customers become bonded to the brand. This is the secret of success for Tesco and Harrah’s, arguably the two best loyalty programs in the world today.

However, considering most companies don’t have a decade (Harrah’s) or fifteen years (Tesco) to develop and refine their program, here is a simple formula to help create an effective loyalty program.

2RL + 2RC + RW = Loyalty (Two parts Relevance plus 2 parts Recognition plus one part Reward equals Customer Loyalty.)

Relevance is essentially providing your customers with information and offers about products/services that would be the most appropriate to them based on their past transactional behaviors. For example, I buy my jeans from Old Navy. Don’t ask me why, but they fit me better than any other brand. If they send me offers/communications offering new styles of jeans or sweaters that coordinate with my recent purchases, it is relevant to me. Not necessarily the specific items – adjacent categories are still relevant. Unfortunately, Old Navy does not do this. Instead, I receive emails from them offering me great deals on baby and maternity clothes.

Recognition is about letting the customer know that they are important to you. Best Buy does a good job by recognizing their customer’s business with them. Not only do they provide their customers with additional value, but they also communicate with them in a very personal way. They use the data from their Reward Zone program very effectively to build better relationships.

Reward is the specific offer. While this is very important, it is only a small part of the effort to encourage your customer to truly behave the way you would like. A meaningful offer can drive significant results. It doesn’t have to be monetary in nature, either. Here is an example of this that I read in a recent issue of Business Week magazine. Researchers at Britain’s Nottingham School of Economics worked with a large German wholesaler that sells goods on EBay, tracking the lukewarm or negative comments posted on the site by the company’s customers over six months. They then responded to 632 complaints. Half of the e-mailed responses offered a brief apology. Half offered instead a “goodwill gesture” of a small cash rebate. All e-mails asked customers to remove the comments they had posted online. For those offered the rebate, it was a condition of receiving the cash. About 45% of customers receiving an apology withdrew their so-so or negative ratings, compared with 21% of those offered money to do so. To me this shows that a relevant human approach that recognizes their customers’ goodness can deliver a strong response.

So if you are looking to drive loyalty among your core customers, follow this simple formula (2RL + 2RC + RW = CL) and you’ll see some pretty strong results.

Cultural Distinctions In Service

This past week I travelled to Asia. My first stop was in Singapore to help launch Euro RSCG’s retail and shopper marketing capability called Shop@Euro. Then I made my way to India to discuss how best to use data to gain a sustainable advantage in the new global economy. My speech in India was titled – A New Imperative for the New Economy.

I flew on four different airlines during this trip. United Airlines from Chicago to Singapore. Singapore Airlines from Singapore to New Delhi. Kingfisher Airlines (a local entrant) from New Delhi to Mumbai and Lufthansa Airlines from Mumbai to Chicago (with a stop in Frankfurt).

The service on all four of the airlines was absolutely terrific. What interested me was how each airline delivered great service — albeit in very different ways.

After pondering the differences, I’ve come to a simple distinction in service styles: Functional service versus Emotional service.

United and Lufthansa delivered service that was primarily focused on ensuring a high degree of physical comfort. On the other hand, service on Kingfisher and Singapore was centered on how I felt during the flight – going beyond physical comfort to ensure a sense of emotional calm.

Why did I experience this distinction? After considering a number of different hypotheses, I arrived at one answer: The significant difference in service is due to the unique cultural perspectives of these brands.

Western brands tend to deliver on the ethos prevalent in their context. It’s all about efficiency. Their service experience is structured to ensure that their passengers are productive. From their detailed menu to the bottled water they offer, everything enables the traveler to have control of how he or she plans to fulfill their own needs.

Eastern airlines, however, focus more on striving to deliver a relaxing experience that attempts to create a calm and quiet environment. Everything from the tone and volume of in-flight announcements to the language used by the staff. It is different than their Western counterparts and consistent with their cultural backgrounds.

My experience enjoying these completely different approaches to great service has encouraged me to evolve my understanding and appreciation of brands within a behavioral context. It also raised an interesting question:

As we continue to live in a world that’s getting more and more homogeneous, do these culturally-driven distinctions in service set new and conflicting expectations?

If so, how can brands evolve and deliver?

Another Sign of our Decline?

I grew up in India. One of the realities there was the concept of what we called Indian Standard Time (IST). Everything would happen about 30-45 minutes after it was scheduled. The reason for this was simple. The infrastructure in those days was quite old and one would say a bit decrepit. Old roads. Old rail lines. One airline with old planes. The result of this was breakdowns, malfunctions, mechanical failures of equipment and potholes too numerous to count. The kinds of issue and challenges one accepted of what was considered (in those days) a “third world country”.

When I moved to this wonderful country a couple of decades ago, I was exposed to (as Dan Zajac, my first boss called it) American time. 9 AM meant 9 AM. It was awesome. Everything ran on time. Everyone worked on time. The train from Naperville to Chicago’s Union Station was only late once in a 2 year period. And that got most of the passengers upset. Flights from O’Hare (except on those stormy winter or spring days) were quite regular. The lights on the Expressways came on exactly at 7. Roads got fixed in the Summer so that they were new for most of the year. The reason why we were the “first” country in the entire world.

I’m sure you’ve noticed, but things have changed in the past few years. I travel a lot, so this is based on personal experience. These days, very few flights are on time. It has become such an endemic issue that we just expect it and plan around it. The train from Naperville to Chicago has been late eight of the last ten times I have taken it (not statistically significant, I know). The reasons? Switch failure, mechanical issues, stuck tracks are some. This last winter, as reported by the Chicago Tribune, we had over 10,000 pot holes in the Chicagoland area. Driving around was an adventure, to say the least. These are a few personal examples of the fundamental weakening of our roads, rail and air systems. The fragility of our aging infrastructure.

Is this what we should expect? I have been excited with all the talk in Washington about investing in our infrastructure. That’s exactly what we need. I am totally on board. We need this to ensure that we keep our country in the lead but more importantly, create an environment that is sustainable for the generations to follow.

We need to make sure the trains run on time, the planes fly on schedule and the roads are in good shape. This will allow us to again live on American time while improving our productivity further. Let’s not forget that our emerging competitors are building new roads, rails, airlines and systems. This will give them the advantage in the new global economy. We need to stay competitive. Invest in our roads, rails, and air. Bring new expansive technologies into play. Invest in ourselves to put away the sceptre of any possible decline. And create the opportunity to deliver on our limitless potential.