Saturday, January 24, 2009

Grinding the Axe...

Consumers across the world have been receiving communications stating their reward points have been devalued, but few of them have stated why or what next?

Dropping the value of reward points, withdrawing privileges, reducing the life of points etc. are common techniques that come into play when strains appear on the bottom line. These are justifiable business measures and would make the finance chaps (and rightfully) rub their hands in glee.

As a preferred loyal consumer, if my lounge access were withdrawn suddenly, I'm clearly not going to be a thrilled loyalist. I would vent and unleash my angst on the brand and its stakeholders, as I've just been told that "I am not special anymore". And here lies the crux of the matter for the financial stakeholders in a company.....Surviving Today v/s Sustaining Tomorrow.

When the tough call of diluting / withdrawing the benefits of a programme are undertaken, take a moment to switch your views and talk to the consumer in you.

A few aproaches that you may like to consider:
1. All OR Some : Do you need to grind the axe on the benefits for all the customers or some? Apply Pareto and compute impact.
2. Price : This may actually be an opportunity for you to price some of your services. Convert a challenge to an opportunity (sounds cliched but quite true). The customers who see true value may actually pay you for it
3. Why are you doing this? : Have a dialogue with your customers. Tell them why you're doing this. Assure them that you're with them over the long haul and this is a temporary blip. They may not like it, but they would understand, which is equally important.
4. What does your brand stand for? : Ensure that your actions are in line with your brand's value system.
5. Measure long term Impact : Its great to compute immediate impact to your bottom line. But also measure and be aware of the future economic impact of losing customers and the cost of getting them back on board. You may still take the call, but be sure to inform yourself and the other stakeholders.

Is the Free Ride Worth It?

A motorcycle manufacturer in India, with over two million loyalty customers, has one of the largest customers bases for a loyalty programme. The customer proposition is quite simple and relevant to the target audience. However what makes it different, is that its a paid programme. Customers need to pay upfront for a three year membership.

Most loyalty programmes have very low entry barriers / qualification criteria for its customers. The benefits via ease of enrolment for the customer & for the brand owner easy access to a large customer base to which it can communicate and potentially convert to increased wallet share and hence revenues are quite obvious.

In any loyalty programme, there is a clear pyramid of customers that is formed within 18 - 24 months, wherein the Pareto principle quickly falls in line...Less than 20% of the customers contribute to the value from the overall base.

Which takes me to the set of (existential) questions.....
1. Do they clearly understand the value proposition...OR rather...Do they take the time enough to understand the benefits of the programme?
2. Does the customer actually value the benefits that your are offering her...(OR is that too brave a question to ask for the programme manager?)
3. Does this customer take your programme seriously enough?

The third question is the most vital for the success of any programme. It is vital that the customers views a clear give and take in this relationship and has his skin in the game. You may believe that her business over the life of the programme is the "skin", but it may just not be it.

Most loyalty programmes have attained success via word of mouth from its loyal consumers and not as much from the programme communication. Hence the programme is always susceptible to a risk of failure if the word of mouth does not reach the customer in adequate and frequent dosage.

So, why leave it to chance? Pricing the access to a loyalty programme has the following potential benefits:
a. It ensures that the customer clearly understands and believes in the value of the programme
b. Ensures that the organisation stakeholders are more involved in the customer engagement and education at the time of enrolment
c. Gives your P&L immense latitude, by covering huge administrative and financial costs that you would incur.

Pricing a programme would face huge resistance across internal and external stakeholders, the programme size build up would take substantially longer, but the P&L does look rather different.

Take your customer seriously, but they should take you seriously too!

p.s. There is a difference between a customer communication programme and a loyalty programme...

New Is In...Old Is Out!

The over-obsession with new customer acquisition, often at the expense of existing customers is quite perplexing and worrying.

I've shifted residence recently, and was seeking to transfer my DTH (Direct to Home) connection. The experience has been quite hilarious and often painfully frustrating. The engineers arrived promptly and indicated that there would be nominal shifting charges and some other installation charges. I questioned the rationale for the latter, and did mention that I have been a customer for over four years, subscribing to their premium packages. Also did bring to their notice that my subscription had been live for over three years and this was the second time in this period that I was required to incur these charges.

The team quite obviously did not take well to my questioning their irrational installation charges and disappeared without a trace! I waited patiently for over a week and then contacted the local sales team. I was politely informed by the chap, that the engineering team had updated the system as "customer refused to pay any charges" and hence recommended that my service be deactivated.

The saga continued for over a week, wherein I was assured repeatedly that the installation team would arrive, but they just did'nt turn up. I did shift my business to an alternate service provider, but I continue receiving warm marketing messages from my old friends highlighting new offers and services. Quite clearly they do not know that I am no more their customer.

I've had several other similar experiences and has forced me to take a hard look at the business that I manage as well, and often believe that we do not spend as much time as we should on our existing customers who deliver revenues and contribute to the bottomline.

These are challenging timelines, and budgets for large customer acquisition would be hard to come by. A reality that we tend to ignore quite often...the impact of incremental investments on existing customers are often higher than those on new customers.

Keep your eye on the ball and don't take your existing customers for granted. This is perhaps the fundamental basis for creating customer loyalty.

Thursday, January 8, 2009

The Walls Come Tumbling Down.

I can recall when I first ventured into loyalty marketing there were clear lines of delineation between the various advertising disciplines and agencies.

General advertising was the “brand” stuff, home of the big TV budgets and glossy print advertisements. DM or direct marketing was advertising that called for a response, whether it was via a mail package, banner ad or DRTV spot.

And then there was loyalty marketing, which I soon learned had a different perch in the advertising hierarchy. While working in direct marketing we often complained about getting the budget crumbs from the general agency, in loyalty we often had to settle for a single crumb.

Furthermore, the CMO at our client companies were often not even involved in the loyalty marketing effort, as he or she busied themselves with the more high profile brand work. Often, the management duties for loyalty were assigned to a marketing subordinate well down the hallway from the corner office.

For one creative assignment it wasn’t uncommon to have three different agencies and three different creative directions involved. (Four agencies if a digital shop was in the mix.)

But today the walls are tumbling down.

I’ve just wrapped up a TV campaign for 21st Century auto insurance comprised of TV spots that push the brand while selling (brand DRTV). In addition, the key premise of the campaign is being integrated into the company Web site, and will soon appear in customer e-mails, acquisition direct mail and even viral videos.

In the past, this work might have been spread over three or four different agencies. In this case, it’s being done by one. The result: a stronger, better integrated, more coherent campaign.

Today, especially as new forms of digital media enter the marketing fray, the old dividing lines between general and direct and loyalty and digital are becoming hazier than ever. And for all involved, that’s a very good thing.