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?

Practice What You Preach

It is always important to practice what you preach, especially when it comes to marketing. A fundamental example of this is a direct marketing piece I created and sent out this past month.

The piece was basically a box designed to hold a cell phone with my telephone number programmed into it, as well as some written information about Euro RSCG Discovery. Recipients were encouraged to call me to discuss Discovery’s marketing and business solutions first and read the material second.

Rather than simply reading about our company, this piece got people to behave the way we wanted, right from the start. They engaged in a conversation about it, which provided a deeper, more relevant perspective of who we are. And it worked – we had a 70% response rate!

Many companies send out direct mail and expect people to read and believe everything they have to say about a product or service. At the end of the communication, recipients are urged to call for additional information. However, it typically does not work that way. Many times, recipients do not read the material and do not come away with a better understanding of the company’s offerings. Because it is a passive, one-sided communication, it is not nearly as effective as getting people to act first.

Encouraging a behavior first allowed me to connect with prospects in a different way. After the call, these people then went back and reviewed the written materials in the package and fully understood our value proposition. Our conversation made the content even more personal and relevant.

The old model of message first and behavior last is no longer effective. It is incredibly important to engage your customers and encourage them to behave first. That is the best way to serve your business.

Webinar This Thursday, May 7th

I will be conducting a free webinar this Thursday, May 7th at 12:00 pm CST / 1:00 pm EST. In the webinar, I will talk about the new approach to marketing that I call Brand Rituals™.

If you would like to attend, please email me for additional information.

A Sign Of The Times – Companies Changing Their Marketing Focus

It takes a fundamental change in the environment for marketing models and approaches to change. In the current environment, we’re seeing a significant number of companies begin to use the principles of retention marketing (over acquisition marketing alone).

Banks are leading this paradigm. Given their unique situation, they have recognized the benefit of retention-based marketing strategies over typical acquisition-driven efforts. Last week, Mintel Compermedia reported that banks registered a 57% increase in direct mail geared toward selling additional products and services to current customers. A very big shift.

Banks also increased CRM-related mailings by 37%, including loyalty messages, renewal notices and upgrade offers to entice current customers. In fact, 94% of all bank emails in 2008 were sent to existing bank clients. The number rose from 89% in 2007, while acquisition-based emails dropped from 10% to 6%.

While acquisition-directed mail still accounted for the overwhelming majority of all bank direct mail, the percentage dropped from 85% in 2007 to 81% in 2008. Conversely, retention-based mailings increased to 15% last year.

Banks are clearly beginning to realize the importance of focusing on their existing customers. In today’s tough economic environment, it is more difficult than ever to acquire new clients and much more expensive. Companies in other categories need to learn from this and do the same. Especially retail, where most marketing departments are still being asked to drive traffic by acquiring new customers and very few have organized retention marketing programs.

This shift in your strategic focus – protecting your current customers and getting them to buy additional products and services is the best way to drive profitable growth at this time. And by communicating with them and engaging them in a deeper relationship with your brand, you can build valuable customer loyalty in a time of financial uncertainty.

Think current customers. Think retention first. You will see better results.

Real Issues, Real Solutions, Real Results

In today’s challenging economic environment, it is more important than ever to address the issues that matter most to your customers. Now is the time to pay close attention to their changing behaviors and react appropriately.

In fact, a new report from Forrester Research shows that customer experience is closely tied to customer loyalty, and that the correlation between the two has increased since last year.

Bruce Temkin, VP and principal analyst at Forrester pointed out that, “when times are good, consumers just continue on their merry way, but in this economic environment, every purchase they make, every service interaction they have is a large portion of what they care about. They’re more emotional about everything and, therefore, a bad experience resonates even more negatively.”

Without analytics and research, you miss out on valuable information which can make or break the relationship you have with your customers.

Once you understand the challenges facing your customers, you can offer real solutions to address these issues and make their lives easier. In return, you will foster brand loyalty and generate real results and ROI.

What do you think? How can focusing on customer’s real issues and problems help a brand’s business?

Why Attend Conferences?

“He who learns but does not think, is lost! He who thinks but does not learn is in great danger.”
- Confucius

As a frequent conference attendee and speaker, I thought I would focus on the value of these types of events for this week’s post.

There are many reasons to attend conferences, the most obvious being education. As a professional, it is important to continue to learn. Today’s marketing world changes daily, so what you learned back in college or your first few years on the job may not apply today. You can gain more from one day at a conference than from all of the blogs and articles you can read in a month.

Learning through conferences is also great for personal development. It keeps you fresh, energized, inspired. There is nothing like being in a huge banquet room in a beautiful hotel filled with people who share your same passions. The energy is undeniable. Pulse is an essential part of that. You miss out on context with blogs, trade publications and the like. Seeing the reactions of those around you helps you keep an eye on the pulse of the industry. The experience of actually being there to participate in the discussion makes it much more worthwhile than your everyday podcast or webcast.

In that sea of like-minded individuals can even be your next client, colleague or friend. The networking at conferences is yet another valuable element. Contacts made while grabbing a coffee or lunch between sessions can be well worth the time and cost of the conference alone.

For these reasons – and many more, I make a habit of attending all of the conferences that my schedule will allow. I hope to see you all at my next event – the Retail Advertising Conference in Las Vegas on Feb. 25-27 – where I would like to buy you that cup of coffee. Please don’t hesitate to contact me if you will be in attendance.

RAC 2009

If A Customer Behaves In The Forest And No One Is Around To Analyze It…

According to the Annual Marketing Survey by Alterian, companies will continue to invest heavily into online marketing in 2009, but less than half of marketers plan to use analytics to measure their campaigns.

Online direct marketing will also increase this year, with 62% of organizations planning an increase in that budget. Additionally, companies will look towards social networks, email, SEO and pay-per-click advertising. Yet, only 47% of those surveyed will use analytics to measure the success of this activity.

The data gathered around these types of consumer behaviors can be extremely valuable. It is this kind of information that can help you recognize your best customers and how they respond to your brand’s communications. Analysis of customer behavior can help refine your marketing campaign, increase customer loyalty and ultimately drive profits in today’s challenging economic situation.

So why aren’t more of you doing it?

Black Friday Behavior Versus Attitudes

For the last few months, retail industry experts and research firms have been predicting some pretty grim holiday sales numbers. It is no secret that our country is experiencing tough economic times. However, this “Black Friday” surprised many with an increase in sales of 3 percent from last year, according to research firm ShopperTrak RCT Corp. Reportedly, sales rose to $10.6 billion. This is the smallest increase since a decline of 0.9 percent in 2005 – compared with an 8.3 percent surge last year.

While the increase is smaller in years past, it is still an increase in sales. This is just another example of how people tend to focus on consumer’s thoughts or attitudes rather than their behavior. American shoppers behaved. They still shopped this weekend, despite their more frugal mind-set.

What does this mean? Have prices finally gotten low enough that customers are buying all of the things on their list? Could this mean that consumer confidence is not as low as we once believed? Is behavior outpacing attitudes?

What do you think?