As we age I think we sometimes become more sentimental. The analyst in us looks back and tries to understand what has really changed. My consensus is not really very much. I’ve been in the direct marketing industry my entire career and the questions being asked today are much the same as yesterday. The answers, however, are much more complex — strategic alignment, 360 view of the customer, integrated systems, one channel view, etc. We all wanted these things 30 years ago and we still want them today with few companies (even today) actually realizing the goal. Surprising? Not really when you think about it. Of the companies I’ve worked for some have made a real commitment to customer marketing while for others it is simply the current thing to do and there was no investment. Worse still the digital guys thought they knew all about it and you know that story. This blog is about things observed a while back that are still relevant now.
The scene is childhood in the 1950’s. You’ve just come home from a trip to the supermarket with your mother. She passes you a sheet of little green stamps and a book to stick them into. Finally, after weeks of collecting and licking and sticking stamps enough books are full to warrant sitting down with the catalogue of all the neat stuff you could “buy” with the books of stamps.
For those of us too young to have participated in that primordial, philatelic pastime, let’s fast forward to the mid ’80’s. In droves we joined the ranks of”frequent flyers”, flitting from airline to airline to take advantage of the latest promotion for triple miles between Oshkosh and Oshawa. It was fun…for awhile.
Then came the ’90’s sales slid…costs climbed…profits peaked.
Suddenly, like a virulent contagious disease that remains undetected until the emergency wards fill up, the dernier cri was unleashed on an unsuspecting consuming public…customer loyalty programs! Things to collect like membership cards, points and more points. Stuff to receive like newsletters, free samples, special services. Places to belong like clubs and circles. Wonderful words to describe you like Premium, Select, Priviligé. You and your peers, whoever they are, from kids to seniors.
Cookies, coffee, cat food, credit cards or cars, it seems no product is immune (or not for long) from the scourge of customer loyalty programs. In fact, I’m sure it could be a full-time occupation just keeping up with them all.
” But, but, but…”, I hear the marketing managers sputtering. “We have to get customers to stay with us. We have to compete. We’re building a database that allows us to track customer behaviour around the clock. We have all this information at our disposal. Look at this powerful new program, these prestigious new premiums, our bountiful new benefits. We’re giving away gifts. We’re giving away goodies. We’re giving away margin…”
You’re giving away the farm.
Know why? Loyalty can’t be bought. At least, not for long.
Not to mention it may all just be getting to be a teensy bit much too much for people to take. In medicine, when the disease takes over the patient dies. In marketing, when the customer reaches overload…you know what happens next.
Let’s put on our consumer hats for a minute. I ask, “Hey, Marketing World! This is not only about my loyalty to you! What have you done to deserve my loyalty? You’ve pushed merchandise at me. You’ve mailed me more stuff than I ever care to read. You’ve invaded my privacy. I’ve got a wallet full of every conceivable form of membership identification. Every breath I take, every move I make has been data captured, data processed and data based (or may be it’s de-based). Hello, out there. Anybody home?”
All I, and, I think, most consumers really want from a “loyalty program” is:
- To perceive that what you’re trying to get me to do has some genuine substance and relevance for me…personally. Too often marketers seem to assume people are just sitting waiting for their first next bright idea. Wrong. My life has context and texture and a lot going on in it. That wonderful database will tell you all about it. Now, what are you going to do for me that ninety-nine others won’t do?
- Not to have to work at this loyalty thing. Just make it easy for me. Don’t ask me to remember to carry goofy little cards around, or make me wade through encyclopedias of instructions and wait weeks and weeks before collecting “my rewards”. Relationships with my nears and dears keep me busy enough, thank you. Don’t ask me to go out of my way to work at one with you, because I simply won’t.
- A little love in your heart, as the old song goes. OK, that may be pushing it, so I’ll settle for a little empathy…human being to human being. The target market of one. What that looks like is well-researched, substantiated approaches, real thought put into the use of technology, delivered through tactics that aren’t intrusive in an obvious way.
- Delivery on your promises…and then some! You earn the right to receive my loyalty and maybe, just maybe, I’ll stick around.
Charles de Gruchy remembers how it was
It’s been said that the trouble with the future is that it usually arrives before we’re ready for it and, in interactive media, the future has started to arrive, heralded (as it usually is) by the unmistakable sound of money hitting the table.
If you’re looking for opportunities to grow your business via interactive media, the key word is opportunities. We’re a long way from a significant reality…and not just in the technology department.
Somebody finally thought to ask consumers what they think of it all. A study conducted by Advertising Age found that only 19.1% of US consumers are even aware of the concept of interactive media. 80.4% were not aware of interactive media at all! Despite the proliferation of front-page banner headlines, business news stories and hyper hype.
So, who’s going to be the home shopper of the electronic future?
Traditionally, 60% of shopping from home has been conducted by women, but when it comes to TV shopping almost 50% are men. Does that say men spend more time watching TV? It probably depends on the day of the week and the progress of the home team!
Not surprisingly, age plays an important role in TV shopping. In theory, retired people have the time, money and interest in TV to be good prospects, however, scarcely 11% of retirees actually shop from TV. Meanwhile, almost 45% of TV shoppers are under the age of 35. Compare this to traditional catalogue shoppers where less than 33% are under 35 while almost 14% are in the senior age bracket.
Traditionally, the majority of paper catalogs appeal to a, relatively, up-market crowd. Almost 40% of catalog-shopping households earn over $40 thousand. TV shoppers, on the other hand, have been decidedly down-market with almost 45% earning $25 thousand or less.
Given the billions of potential sales dollars all the articles about interactive tell us about, the gentrification of TV home shopping is to be expected. Upscale American catalogers are not jumping on the band-wagon to sell junk jewellery to housebound women from blue-collar households with overextended credit cards which is how traditional marketers have generalized home shoppers.
Interactive television and the super information highway has become the buzzword of the 90’s, but, by the time it all comes into existence, I’m afraid, we’ll all be tired hearing about it.
There was a wonderful cartoon in the Globe and Mail recently. The scene is a dark and stormy winter’s night. Snow is piled to the eaves of an isolated house. The first dialogue balloon says, “Another ferocious blizzard! No power! No phone! No TV! No computer! We’re totally cut off from the information superhighway!” The responding balloon says, “Isn’t it wonderful?”
Despite all the news stories assuring us it’s just around the corner, at the moment, interactive TV is confined to some very localized testing in the US among a few thousand households. Predictions are that systems will roll out from 1996 to 2000 and that by 2000, $3.5 trillion in worldwide sales will be conducted through interactive TV. Meanwhile, the Canadian company, Videotron, has had a modest head start in Quebec since 1990 with the largest, most advanced system and 230,000 subscribers.
What does it all mean for marketers? For starters, don’t panic–time is on your side so let those with the most money iron out the bugs first. Likewise, don’t cancel your printing contracts. The paper media won’t disappear. It will (or should) change to integrate with all marketing efforts in whatever media, so get ready for a metamorphosis. Tune in now to learn for the future. Get involved, if you can, in helping mold the products and services consumers will be offered. Build relationships with people, and companies who are in the fore-front of technological developments.
Since the superhighway is still in the future, in the meantime, try to learn how to use television. And, look for co-venture opportunities because it’s often too expensive to do on your own.
In the end, always keep in mind that it’s only the media that has changed. You still must offer high quality products at affordable prices, satisfaction and personal service.
Joel Barker, the author who made “paradigm” the business buzzword of the early 90’s said, “The best time to look at new ideas is well before you need them”.
And, I say, the time to start looking at interactive media is now But, look hard before you leap! Don’t forget about that 80% of people who have yet to figure out what interactive media means…and could care less!
Charles de Gruchy remembers how it was
At one point before I left graduate school I learned that the Peloponnesian War was really a precursor of one of our modern conflicts – the Vietnam War. I learned Napoleon marched his French troops to invade Russia, almost all of his troops died from frostbite, hypothermia and starvation. Hitler did the exact same thing. In the direct marketing industry we are constantly repeating ourselves but we don’t call it best practice and tend to be cautious about adjectives like ‘innovation’.
My partner and I were sitting around recovering from the day. I think it was about 11:00 PM and we were talking about calling it quits for the day. But our conversation rambled on and into a discussion of analytics strategies. Our head of analytics, Steven Shaw, wandered over to put in his two cents in. Of course he is a little biased in his point of view but his opinion is that the relationships between ideas, objects and numbers are all predetermined in one fashion or another. There are no truly new ideas. What we represent as new is really the discovery of something that was already there.
So I asked what does that mean in the end or is this just the blather of three agency hacks. Oops, sorry Steven I shouldn’t have included you! Brian, my partner, jumped in to say that none of this is really meaningful in that the new idea or the idea of the moment is just that. Where it might have emerged from or been adapted to is more often forgotten or simply considered old fashioned news of another generation. We’re cool aren’t we?
Steven brought us back to reality and an analysis we were working on for Holt Renfrew. The objective was to understand the characteristics of best customers. The strategy was simple – figure this out and find more. Not complicated from an analysts perspective but a challenge in the Toronto market where the top end of the file is measured in tens of thousands rather than 100s. The approach he followed was to first cut the file based on an Arthur Hughes standard view with a ranking of Recency, Frequency and Monetary. But he knew, in and of itself, that wouldn’t be enough to meet the objective of the analysis. What emerged was a three step approach: first with RFM; second, to build persona on RFM and third, enhancing the result with modeling to asses specific points of propensity within the best customer group. He asked the question whether there was any innovation in the process.
My quick off the mark response what that the steps in isolation were standard stuff of our business but the integration of the steps into a strategic progression of understanding of a group of customers behaviors is a significant innovation. It’s the process that’s the innovation not the parts and pieces.
Brian jumped in to add that as corporate culture continues to degrade from the disciplined strategic planning methods lead by the packed good industry to something closer to organized ad hoc decision it’s the creation and management of process that will deliver a company a strategic point of difference.
Steven and I laughed but we knew he was right!
Things in Toronto were changing and changing rapidly. Business as moving south as quickly as it once came to the city. Marketing departments were being dismantled with the center of gravity moving to New York and Chicago. With change came ambiguity and dysfunction to a marketplace that was, frankly, the best run in North America.
Steven again pulled us back on track. We had executed the RFM analysis for Holts. Brian and I both wondered why they hadn’t done this themselves. Is it that hard? Steven laughed and said no not hard but complicated. It’s not so much the analysis that’s the challenge it’s the application across customer tough points that’s the problem Holts was a little more confused than most retailers because they believed that monetary was the key driver of next purchase rather than recency.
Steven then remembered a story from his good friend Lester Wunderman – there are a multitude of steps in any direct to consumer program but success isn’t in any one single step but is in the collective. In other words it’s a successful process that delivers profitability.
So the process becomes the innovation today.
Our ramble ended at about 1AM. We know that the Holts project would work. We were less optimistic about where the practice of business was headed.
Customer attrition is a lot like dandruff–by the time you realize you have the problem, it’s already too late to prevent it. Unless, in the case of lapsed customers, you’ve built a predictive model based on measurable characteristics of lapsed customers which can be identified among current customers.
The notion of value in keeping the customers you have versus constantly acquiring new ones is certainly not a new one, but you’d never know it to look around. Awhile ago I wrote a column about switching away from a hair salon I’d been faithful to for about ten years. Have I heard a boo, halloo of any kind? Not a whisper. Let’s see–ten years times fifty to sixty dollars a visit times twelve visits per year–that adds up to about six or seven thousand dollars they won’t be getting over the next ten years.
Meanwhile, the constant hunt is on for new customers…also known as the revolving door. In most companies, 30-50% of customers who appear to be new are actually lapsed customers who have re-surfaced incognito. Not because they’re coy and tryng to avoid being recognized, but because, as marketers, we’ve failed to keep them when we had the chance. And, to add insult to injury, we don’t even know they’re back.
The trick is to get in front of them. before they leave or, at least, to do something about it when they go. But, why does it seem so difficult? It must be difficult, otherwise wouldn’t there be a multitude of examples of well-focused reactivation activities I could tell you about. Here’s the closest I could get:
Recently, an acquaintance received the following missive from CITIBANK. The letter went like this: “It has recently come to our attention that you are leaving less funds on deposit with us. We are very concerned that this may be an indication of some dissatisfaction you have experienced with our service. Our goal is to provide our valued customers, like yourself with the best possible service and be bank of choice for all your financial needs. It appears that we may have fallen short of this goal with you and we very much what to know how we can correct the situation. I have enclosed my business card for your reference and I will be giving you a call to discuss any financial needs which we may have failed to satisfy for you.” Now, other than a little grammatical awkwardness, you might say that ain’t bad at all. Rather thoughtful with overtones of mea culpa. Refreshing coming from a bank.
But, now picture this. This letter was received by an elderly widow living alone who, for the first time in her life, has a significant investment account to worry about. Key words…to worry about. This letter made her worry. This letter upset her. The letter was from a bank. Banks are serious stuff. It sounded as though there was a problem. Whose problem was it? Hers or the bank’s? What should she do about it? Needless to say, it didn’t help that the Branch Manager never made good on the promise to call and follow up.
Charles de Gruchy remembers how it was
I get a lot of mail. Probably because I go out of my way to get mail. But, I can count on one hand the number of commmunications I’ve ever received that you might call “relationship building”. Sure, I’ve had lots of newsletters and sample packs and special offers and shiny plastic cards and mailings trying to sell me more stuff.
But, remember we’re now dealing with consumers who are reducing the contents of their wallet to one piece of plastic and spending more time thinking about how to cheat on the next round of tax grabs rather than figuring out how many points it will take to “earn” a new set of tires? Think about it. What’s the key to a good relationship? For starters, there’s the issue of what kind of relationship the two of you want. And, isn’t it also about conducting yourselves in a way that is relevant to what you’ve agreed the relationship will be?
I’ve often used the following bell curve to illustrate the different points in the “lifeycle” of customers during their tenure with a company. The relationship they have with you depends on where they “live” on the curve at any point in time. In a multi-product or services environment, a customer could be living at multiple stages. The problem is that most companies treat all customers the same. The solid line represents the current value of customers. The dotted line represents the objectives in targeting communications to each stage.
Here are some simplified examples of customer communications that address the stages on the curve. I don’t know about you but I’ve never received letters like these:
“Dear New Customer–
Thank you for selecting your new XYZ product model. We hope it performs to your satisfaction and you enjoy it for many years to come. Please remember that if you have any difficulty of any kind all you have to do is call 1-800-###-#### at any time. ”
That’s it. No sales pitch on more products, no special offers, no envelope bulging with irrelevant paper.
“Dear New Customer (who matches the profile of your best customers)
(Starts with the same first paragraph, as above).
It might interest you to know that, along with the XYZ product you purchased, we offer a complete XYZ family of products. We’d be happy to send you more information about them. Just give us a call any time at (the same toll-free number) or return the enclosed postage paid postcard”
This way the customer let’s you know whether they want those glossy brochures…instead of wasting money (and trees) just mailing them out.
“Dear Best Customer
Thank you! We really appreciate the business you’ve given us over the past year (or six months or five years or whatever relevant time frame). To show our appreciation, we invite you to accept the enclosed gift (no strings attached and it’s not a coupon). You’re also invited to receive the following Best Customer benefits for the next 12 months. (Here’s where you can profitably give away all those goodies you’ve been wasting on the undeserving masses–newsletters, special services, gift with purchase offers, etc.–go ahead be generous). Only people like you, who have spent $500 per month for the past five years (or whatever you calculate as the appropriate criteria) will be eligible to receive these special offers and services. Because we only want to give these benefits to customers, like yourself, who truly deserve special attention, we invite you to call 1-800-###-#### today to let us know what you think of the Club and its benefits.”
Don’t you think this might get a customer’s attention better than one more tedious points program for everybody giving away nothing but margin in the end? And, what a great way to gather positive customer comments for future use in testimonials.
“Dear Customer (who matches the profile of best customers who’ve stopped buying at this point in their tenure)
Thank you! We really appreciate the business you’ve given us over the past “x” period of time. We hope you’ve enjoyed being part of our Best Customer Club and we hope you want to keep your special privileges. Remember, only people who have spent $500 per month for the past five years (or bought from you 35 times and spent at least $100 every time–or whatever you calculate as the profitable criteria) are eligible to receive the special offers and services in our Best Customer Club. To show our appreciation for your past business, please accept the enclosed special offer (this time it is an incentive to buy again) which you can use any time before (deadline date). If there’s any other way we can be of service, we’d love to hear from you at 1-800-…”
By the way, I’m curious whether any one else out there had the same problem recently as a friend of mine. He received a fancy new plastic card in the mail from Petrocan. He promptly, cut up his old Petrocan credit card (Isn’t that you’re supposed to do?) and next day found himself in the embarassing position of trying to pay for gas with a points program card. Why would any company (unless it also likes to burn money) decide it needed a separate points card for its credit card customers?
Charles de Gruchy remembers how it was
Why is it that some companies have to be attacked by stiff competition before they start paying attention to their customers? Nowhere is this more evident than in Bell’s current frenzy to introduce a myriad of offers, services and options. It leads me to wonder how we were ever able to live without all these wonderful things, once upon a time, when the choices for voice communication were between Ma Bell or two tin cans and a piece of string. Why didn’t Bell care so much about our business then? Need I ask? They say, a little competition is healthy for everyone. At that rate, Bell must be getting healthier every day! I’ve never had so much attention from them. Just the other day I got a wonderfully warm and friendly letter that went like this:
“Dear Customer”: (even though the address was personalized), “My name is Sandy Davis. I’m a manager with Bell Customer Service Centre and I’m writing to you for several reasons. The first is to thank you for using Bell Call Answer Services…I want you to know that you’re important to us and we really appreciate your business”. So, Sandy, it’s nice to be appreciated. What took so long?
There was more.
“Secondly, we’d like you to think of us as a resource, as well as a supplier. At the Bell Customer Service Center, we want to respond to the needs of our customers. In order to help you better, we’d like to make our relationship more interactive. I think you’ll agree that we’ve found an interesting way to make this happen”. Now, it is nice to be appreciated but, Sandy and I, we’d only just met and this seemed like rushing things a bit , although, I must say, by this time I was beginning to wonder. Is this Sandy a man, maybe? Tall? Good looking?
The letter went on, “My problem right now is that I don’t know how to help you specifically. We haven’t had the chance to talk”. Why not? Sandy, dear, you have my number! ”
My hopes were soon dashed. (Besides, I’m happily married. )
Sandy continued, “I don’t know as much about your business as I’d like to. I certainly don’t want to just send you a shopping list of all our services…but I do want to see if there’s some meaningful way I can augment your business…That is why we’ve created a brief response form designed to help us learn more about your needs and preferences”. After more friendly phrases about sharing experiences and viewpoints and thanking me repeatedly, Sandy signed off with “I’m looking forward to receiving your response and to the opportunity of getting to know you better.” Did this mean Sandy was suggesting, dare I say it, forming a customer relationship?
Enclosed was a one-page survey form
The first question asked me to rank the relative importance to my business of areas such as generating new business, building customer relationships, providing quality service, controlling costs and managing time. I guess Bell must have the luxury of choosing among these issues and, besides, how will the fact that all of the above are extremely important to me help them get to know me and my business better? The survey went on to ask such as things as whether I viewed the role of telecommunications in my business as operational, strategic or both, what my business growth outlook is over the next 18 months, how many calls I receive in a day and how often someone is available to take calls and, oh yes, how satisfied I am with my relationship with Bell. Interestingly, the only choices given for answering the latter were Somewhat, Moderately or Extremely–behind that one the operative philosophy must be that no bad news is good news.
Not one question asked me directly anything about my business telephone needs. And, here that rascal Sandy led me to believe that, at last, somebody really wanted to know what I, as a customer, wanted. Oh well, maybe next time.
Or maybe there won’t be a next time. No matter what the sector, the message from today’s competitive environment is simple. If you’re not making friends with your customers before somebody else comes along and does it, you’re probably too late. And, if you really want to know what your customers really think, don’t be afraid to ask them questions the answers to which you may not like, but, you’ll know the truth! Why wait till your customers vote with their chequebooks?
Charles de Gruchy remembers how it was