It will be interesting to see if Target's business falls off or increases in the wake of the recent New York Times coverage of their personalized marketing initiatives. What would be even more interesting would be to see how they are responding internally to the excerpt from Charles Duhigg's forthcoming book, The Power of Habit: Why We Do What We Do in Life and Business.
The piece outlines the retailer's focus on expectant mothers, and how creating relevant offers for that segment helped boost sales from $44 billion in 2002 to $67 billion in 2010. Target's journey took them from establishing relevance, to gauging customer comfort levels, then backing off and ultimately re-engaging. Now that customers know what the game is, will they continue to play? My guess is yes, not only because we all love Target's affordable Mossimo clothing and Michael Graves teakettles, but because Target has now figured out the balance of relevancy and privacy.
It is a balance. As Target discovered, some consumers get spooked when they feel like Big Brother is watching. It turns out that not all of the expectant mothers on Target's list were being open about their delicate condition – one father stomped into his local store, demanding to know why the retailer was sending his teenaged daughter offers for baby cribs (he later learned that the daughter was, in fact, expecting).
After that, Target fell back and regrouped. The retailer learned that it was risky to send a sheaf of baby coupons to customers who its predictive modeling had identified as being pregnant. Instead, Target began mixing the baby offers in with other random coupons. “We found out that as long as a pregnant woman thinks she hasn't been spied on, she'll use the coupons,” an unnamed executive at Target said.
The truth is, although consumers are clearly concerned about privacy, they respond to relevance. In a survey by LoyaltyOne, 64% of consumers said that they would be willing to share additional personal information if companies sent them more relevant communications ROI results quoted by companies creating personalized offers are too good to ignore – this includes Kroger, Sobeys and Safeway, grocers that are very close to, if not at, the same level as Target.
Learn from Target's example, and follow these three guidelines as you experiment with your own personalized marketing:
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Set a goal. Target wanted to change behavior in a specific segment – expectant mothers. When a company has massive amounts of data to crunch, a specific goal helps focus the process.
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Start a dialogue. If customers engage in a “virtuous circle” of sharing information, and then receive relevant offers based on that information, they are active participants in the process and they trust your brand enough to keep sharing. Plus they're not creeped out when they get coupons for baby diapers.
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Stay relevant. Once you've started building on customer information, stay with it. If you're relevant one week and generic the next, it looks schizophrenic to customers and erodes trust. They wonder why share personal information if the company doesn't make some decent offers in return?
Thankfully, Target doesn't send me coupons for pacifiers and formula. I'm sure the retailer's predictive modeling combined with my transactional data tells them I am a foodie with a stylish teenaged daughter who is picky about decorating her room. But hey, they could just have asked.
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What was most popular last week in our Market Alert?
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Mark Zuckerberg's Loyalty Manifesto — If you took the weekend to read Mark Zuckerberg's shareholder manifesto, you'll see that Facebook's IPO is the endgame to a covert loyalty scheme that Zuckerberg envisioned long ago. Like many a successful startup before him, Zuckerberg realized that customer loyalty isn't created by a program. Facebook nailed the basics, and its growth has been fueled by the relationship it developed with loyal customers the world over. The letter reveals three key loyalty elements that Facebook was built upon:
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Visa introduces suite of mobile services for U.S. financial institutions —Visa Inc. has announced the launch of mobile services that allow financial institutions to offer their account holders the ability to monitor account history and balances, transfer funds between accounts, and receive near real time transaction alerts on their mobile devices.
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Visa shows modest slowdown to date from new debit rules — According to an article in PaymentsSource, "three months into a new rule capping debit card interchange fees, market leader Visa Inc. is showing a modest slowdown in its U.S. debit business, but nothing on the order of the doomsday scenarios once predicted."
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We have a lot to learn from each other…— I have just settled into my seat on the flight back home from a week in India, the world's largest democracy and, within a decade or so, the world's most populous nation with the fastest growing consumer market. Think of it—a vast cohort of an additional 300 million aspiring consumers enjoying for the first time discretionary incomes adequate to allow them to participate in the promise of a better life offered by the global consumer marketplace. The world has never seen such a rapid appearance of such a huge new consumer market, equal in number to the entire populations of the United States and Canada combined.
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Fear Factor, Frequent-Flyer Edition — COLLOQUY has a whole new take on horror movies. You know, the old-fashioned kind where things go bump in the basement and the first thing a protagonist does is open the downstairs door and..... DON'T GO IN THE BASEMENT!! (Double exclamation points intentional!! Honest!!)
More news! Coming soon! He exclaimed.
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"When it pains, it pours" is a phrase I've often heard, mainly because I made it up and I practiced it in front of the mirror several times before sitting down to write this blog (and of course I'm just kidding).
Kidding or not, I don't need to tell you about the expressions of consumer pain pouring out when people social-mediate about negative experiences (real or imagined) about redeeming loyalty-program rewards - and specific to this discussion, frequent-flyer program redemptions. Blackouts, expiration, inability to upgrade from first class to sitting in the flight deck (just kidding again). Yes, consumers also social-mediate about great experiences, but I needn't go into all the theory and reality of how rumors and bad news and myths travel faster than, oh, the speed of your typical trans-continental flight, now do I?
So it's refreshing to see an independent voice point out the fallacies surrounding myths about the programs we're involved in: "5 Myths Debunked for Frequent-Flyer Miles" from Fodor's Guest Blogger Brian Kelly.
It's good to have the independent defenders - and thank you, Brian. But the defense and the compassionate offense should also come from the industry itself. Marketers, are you defending against the myths as succinctly as Brian Kelley is? And here I'm not talking only about PR and communications, though those are elements. And I'm not talking only about execution in action that disproves the myths, though nothing succeeds if execution doesn't succeed. Specifically:
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Are you fully aware of the myths and misconceptions about the loyalty efforts in your industry in general, and about your efforts specifically?
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Have you created a value-prop that addresses the myths head on, so uniquely and powerfully that outsiders recognize it and tout it, and insiders embrace it?
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Have you communicated the positives clearly enough to not only inspire positive word-of-mouth but also erode the myths?
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Have you stood in front of the mirror practicing saying "When it pains, it pours"? If you have, then you're almost as silly as I am.
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In DMNews, Juan Martinez recently wrote an interesting article, “Customer Loyalty Strategies Determine the Department Store Champion.” Basically, the article compares Sears and Walmart, focusing on the marketing approaches of these two retailers. After reading it, I had a few of my own thoughts.
I would have expected bit broader list of department stores for evaluation if we are looking for a ‘loyalty champion.' I understand picking on Walmart and Sears because their financial performance has not been stellar. And their business and marketing approaches differ widely, so it is interesting to highlight those differences. But I think it might have been more interesting to look at who is doing well and what differentiates them from those that aren't. Maybe Target, Nordstrom, Macy's or one of several others should have been included.
More important, the article looks at tactics and the execution of certain tactics such as email, ecommerce and direct mail. While channel tactics and execution are important, the most interesting aspect to me is the difference in the loyalty model and strategies being employed.
Walmart has always pursued an EDLP strategy and seeks to retain customers with everyday items and consumables with aggressive pricing. Walmart is also built on an operational excellence model centered on highly efficient distribution systems, store planning and placement, and merchandising planning to optimize inventory and inventory turns. Their heritage is bricks and mortar. Until recently, I don't think Walmart has spent a lot of time or focused on digital media and ecommerce.
Sears has pursued a more intimate strategy with a focus on understanding customers and serving their needs. And, their catalog roots have grounded them in managing and developing customer relationships. Most recently, with the acquisition by Edward Lampert, Sears seeks to be a leader (if not the leader) in the online space because the approach fits well with their intimacy strategy. Shop Your Way RewardsSM gives Sears visibility to in-store activity and marries it with online data to get a complete view of customer activity.
This understanding of their history, foundations and model provides insight on many of the comparisons provided in the DMNews article. I don't think the comparison of the various tactics centers on the real issue for both Walmart and Sears. Basically, the problems they have are similar to the problems I have with the article. Both are operating in tactical modes without a consistent, clear strategy that addresses their challenges.
Without a clear, unifying strategy for the underlying tactics focused on the consumer, the challenges will continue. Walmart may face a greater challenge than Sears because of their operational excellence foundation. And, without a loyalty effort, it will be difficult for Walmart to gain customer identification in bricks and mortar enabling them to accelerate direct marketing efforts. Sears does have a leg up here with their loyalty program. The program is young and it will take time to build momentum. Sears' knowledge of direct marketing will benefit them. In the end, the greatest challenge for both is the unifying strategy, organizational structure and customer focus that aligns to the maturity of the US market.
If you follow COLLOQUY, you are well aware of the research they have done on consumer views and perceptions about loyalty. In a nutshell, COLLOQUY found the US loyalty consumer is shifting from a group driven by economic approaches, such as points and discounts, to a more emotional approach. Today's consumer wants to connect. Consider social media growth and the interest in approaches such as gamification.
One area both should consider and build into their strategies is Mihaly Csikszentmihalyi's work around ‘flow' which is central to gamification. Flow provides a framework on how to think about engaging and sustaining interaction with consumers. Granted, this is not the focus of Csikszentmihalyi's work although I think the potential for application for marketers is significant. Basically, flow defines how people achieve high states of consciousness and focus on a given activity. The critical element is people achieve flow when activities don't exceed their skills or abilities leading anxiety, or don't test their skills leading to boredom. Game designers have seen games designed to achieve flow are much more effective and people become more deeply engaged, perhaps even addicted.
Now, for a marketer, what happens if you apply many of the concepts around flow to multi-channel marketing efforts. If you can find a way to achieve the optimal space between boredom and anxiety for each consumer, you will achieve flow. This blog is not the place to get into a full discussion around flow. We'll save that for another time.
John Bartold is Vice President, Loyalty, at Epsilon, and a COLLOQUY contributing editor.
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This past holiday season, I found myself a few miles short of redeeming for a flight home to my native Wisconsin. Eager to see me mum and almost equally eager to not have to drive 10 hours to do it, I bought extra miles to top off the ticket. Yes, I'd have preferred to avoid the extra cost, but on the other hand, I appreciated the convenience and flexibility that purchasing extra miles gave me.
Had I but known that instead of money, I might have been able to pay for my extra miles with unused coffee, steak dinners or CDs I've never listened to.
Well, not literally, of course. But, United Continental has recently given MileagePlus members a choice to pay for extra miles with those very assets, in the form of unused balances on gift cards. Not unused coffee or dinners or CDs per se (we're not talking barter here), but the gift currency I might have used had I chosen to buy those items. MileagePlus members can register their gift cards from participating retailers online and apply unused balances to miles.
I find a number of interesting wins in the MileagePlus Gift Card Exchange program:
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For the consumer: Less "financial pain." How much different is the perception of getting something for free in exchange for something you got for free, as opposed to paying with hard currency? And there might be some consumer "financial delight" here, as well. Consumers who find themselves with the gift-card version of the ugly necktie a loved one gave as a birthday gift - for instance, $25 toward dinner at a restaurant that doesn't suit their taste - now have an outlet for dispensing with the card other than regifting.
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For the airline and its participating partners: The opportunity to reduce liability.
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For the industry: Another example of innovation and creative thinking in a day when both have premium value.
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For the brand-consumer relationship: Communicating in theory and in practice that flexibility and satisfaction of needs are of mutual importance and mutual benefit.
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For my mom: It's OK to give me another gift card to that ugly-necktie store for my birthday - it just might help me to afford to come visit you again.
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As a Qdoba Rewards member, I received notice about a one-day event for all Qdoba customers...tomorrow only.
Qdoba is rewarding Public Displays of Affection - only on Valentine's day. Tomorrow, go to a participating location, order an entree and kiss any person that may be nearby — a significant other, a friendly stranger or even a family member if your desperate. Pucker up and your second entree is free.
And, if you sign up for their rewards program, you can get a free drink or chips and salsa. Get some people in the door, sign up a few new program members and reward the kissers. COLLOQUY — always promoting love — and Mexican food.
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As a gadget freak, my growing collection of personal screens follows me around the house, into my car, shops and friends' houses. As I've been clicking through the weekend (in pursuit of the Guinness record for “number of open windows”) Google's new notice keeps popping up: “We've changed our privacy policy. This stuff matters [click here].” It does matter – nobody knows this more than loyalty marketers. But my bet is that you and most other consumers, like me, close the message and blissfully keep clicking away.
Privacy is somewhat of a catch-22 for consumers. The more transparent and proactive companies are about expressing (and repeating) their privacy policies, the more consumers will ignore them. Click, click, click…ten open windows… privacy notice…Ok I guess these guys have it all taken care of, let's open another window…. Wait, why is my daughter texting me during school? And did I remember to put the recycling out?
Consumers are busy and distracted. Very few have the time, or desire, to read through detailed privacy policies. But at the same time, they need to know that box is checked off. Companies that push that information out make customers feel secure. I know that Google is putting it all out there, and if there are any problems with the policy, someone with more time than I have will ferret it out and let me know. In other words, because Google is pushing their policy, I trust them.
It's pull that triggers the privacy alarm – when a customer has to go searching for hidden and confusing privacy information. This can be sparked by engaging with a company that asks for personal information but doesn't explain why. When trust gets called into question, customers stop clicking and quickly evaluate the value proposition. Is it worth it to share this information? Do I trust what this company will do with it? Do I have time to go searching for and read their privacy policy? With dozens of other open screens (and Google's ever-present promise to open more), customer will click away from a non-trustworthy site faster than you can close a pop-up ad.
Google's privacy revamp offers three simple guidelines for companies determined to keep their website or app open for consumers:
- Push the information out to customers
- Make it easy to read and understand
- Keep it updated, and let consumers know when you do
Google has my trust. Now if you'll excuse me, I have a dozen other screens to open before I can even begin my workday. Oh, and take out the recycling.
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India's Tanishq Jewelers Embraces the Whole Customer.
At the height of British Imperial power in 1877, Queen Victoria took the title, “Empress of India” and declared the sub-continent “The Jewel in the Crown” of the British Empire. Well, I'm sure Vicky wouldn't recognize the economic dynamo that the free and independent people of India have created, especially since the 1990's-era economic reforms. India's economy ranks ninth-largest in the world (close behind England which is seventh), mainly because the combination of education and economic liberalization has created the world's largest and fastest-growing middle class.
Within that context, I was surprised to learn at the 5th Annual Loyalty Summit in Mumbai last week that Jewelry (or “Jewellery” as they spell it) is the third-largest consumer category in India. Traditionally, fine jewelry represent for Indians meaning-filled symbols of life's most significant milestones, and are purchased with the idea of being not only for the intended recipient, but also for her children and grandchildren as an inheritance. Indians of any economic means with discretionary income mark the birth of the first child, graduation from college, the attainment of the first job, and marriage—most definitely marriage—as occasions to give fine jewelry. Incredibly, there are 500,000 jewelry outlets in India, mostly Mom & Pop neighborhood shops, with branded organized retail making up only 5% of that vast and rapidly growing market.
Into this market, characterized by a knowledgeable and demanding consumer and centuries of local buyer-seller relationships anchored in generations of trust, comes the company called Tanishq (pronounced “tan-EESHK”) and their award-winning Annutara loyalty program. In rough translation, the word “Annutara” means “supreme” as in “supreme enlightenment.”1 Tanishq has become India's supreme (largest) organized retail jeweler in large part because it looks for and finds the specific and unique actions that delight individual customers and their families—the lifeblood of the business.
Tanishq is a world-class example of how to translate customer data into insight and make “soft” benefits pay off in “hard” bottom-line results. This is an enterprise loyalty paragon.
Sandeep Kulhalli, Tanishq's VP of Retail & Marketing, explained how Tanishq “decodes” customer transaction data by compiling a broader view of each customer's interests via a few simple questions whose answers bring forth a 3-D portrait of customer needs and preferences. Of their 1.8 Million customers in the program is broken down into facts, such as name and mother tongue (there are a lot of them in India…English is a second language for most). Additional facts are key, such as birthday, favorite music, professional mindset, and presence and age of children (especially daughters of marriageable age).
From that base, Tanishq's Annutara program swings into action through direct marketing and, most vitally, through the “living brand” of its store associates, who lavish care and service on their best customers. Annutara is in it for the long term, recognizing not only the lifetime value of an individual customer, but the MULTI-lifetime value of its relationship with that customer's extended family.
Annutara segments occasions, not just customers—they look at opportunities to enlist best customers as brand ambassadors at the many Indian festivals and holidays, when women display their jewelry. They conduct sweeps of the regions in India to visit rural customers on “customer meets”—where 9000 customers showed up last year. Birthdays are especially important. Annutara store associates actually bake cakes for best customers in the program, and invite them to their local store to share the cake with friends, family, and spouses; a great recognition benefit that exponentially increases the chances for another purchase. After all, it IS her birthday. And he IS her husband, right???
The bottom line: Repeat is up 19%. Attrition down 10%. Across the board, financial metrics are all in the plus column due to Tanishq's radical focus on recognition benefits that have strengthened the brand in a fiercely local and competitive business.
Loyalty Marketers in the developed economies should take a page from Tanishq's playbook and recommit to these types of brand-enhancing soft benefits, or risk further undifferentiated commoditization of their brands and loyalty programs. Earn and burn benefits may drive transactions, but, according to Mr. Kulhalli, “soft benefits drive the relationship.”
Jim Sullivan is Partner, COLLOQUY
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Here are the most popular stories and posts from last week:
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Starwood Preferred Guest launches richest elite traveler benefits in history —Starwood Hotels & Resorts Worldwide, Inc. has announced new benefits that make its award winning loyalty program Starwood Preferred Guest (SPG) the richest elite program in the industry. The more SPG Members stay, the more choices are available and the more personalized the benefits become with standouts like lifetime status, first-of-its-kind 24-hour check-in and a dedicated Starwood ambassador who provides one-on-one service to uniquely tailor the guest experience.
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Spirit's "DOT Unintended Consequences Fee": inspiring more unintended consequences than envisioned? — Spirit Airlines has begun charging what they call a "Department of Transportation Unintended Consequences Fee" in response to recent regulation. As CNN reports, "Spirit Airlines says a new federal regulation aimed at protecting consumers is forcing it to charge passengers an additional $2 for a ticket.... The new DOT regulation allows passengers to change flights within 24 hours of booking without paying a penalty. The airline says the regulation forces them to hold the seat for someone who may or may not want to fly. As a consequence, someone who really does want to fly wouldn't be able to buy that seat because the airline is holding it for someone who might or might not end up taking it."
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BP unveils marketing plan to revitalize brand and offer more compelling reward program — According to an article in Convenience Store News, "BP Products North America Inc. will make a $500-million investment in its U.S. retail brand over the next two years. At the foundation of its marketing plan is a distinctive fuel offer, improved customer experience and a more compelling loyalty rewards program."
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Starwood survey commissioned to celebrate launch of new life-time status for elite members — It may no longer be a stretch to say travelers are married to their frequent traveler programs. In fact, 73 percent of travelers would choose loyalty-program benefits over a spouse if they could take just one on the road, according to an eye-opening survey of nearly 10,000 globetrotters released today by Starwood Preferred Guest (SPG).
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MasterCard introduces U.S. roadmap to enable next generation of electronic payments — MasterCard has introduced a comprehensive roadmap focused on advancing the U.S. electronic payments system.The roadmap, which includes the path for migration from magnetic stripe to EMV technology currently available on "chip" cards, will serve as the foundation for the next generation of products and services developed to enhance the way consumers pay.
Stay tuned for more loyalty news and views this week.
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I have just settled into my seat on the flight back home from a week in India, the world's largest democracy and, within a decade or so, the world's most populous nation with the fastest growing consumer market. Think of it—a vast cohort of an additional 300 million aspiring consumers enjoying for the first time discretionary incomes adequate to allow them to participate in the promise of a better life offered by the global consumer marketplace. The world has never seen such a rapid appearance of such a huge new consumer market, equal in number to the entire populations of the United States and Canada combined.
I was in Mumbai to address the 5th Annual India Loyalty Summit and help announce the launch of COLLOQUY India—a new range of research, education, and media resources specifically designed and tailored for loyalty marketing practitioners there. In blog posts later this week, I'll have more to say about that unprecedented and unmatched launch. For now, I want to thank my hosts in India for their gracious and enthusiastic reception of COLLOQUY India, and also to remind them to make use of its definitive (and free) databank of the lessons their loyalty marketing colleagues in the developed economies have learned since 1990 and before. Many of those stories and the principles that underscore them can apply to their burgeoning market.
Just as important though, I want also to convey to our readers in North America, Europe, and other “developed” consumer markets how much Indian loyalty marketers can teach us these days. We have a lot to learn from each other. As we said in the 2011 COLLOQUY Cross-Culture Study White Paper focusing on India, the country is a complex mosaic; its loyalty market is, as well. The airline and hotel sector programs are nearly as old and sophisticated as any others globally. In fact those two sectors compete globally with all the other frequent flyer and hospitality programs for the elite Indian business traveler, who is a global consumer. Meanwhile, the development of formal Indian loyalty programs in retail has lagged due to the highly fragmented, local, and “unorganized” nature of Indian retailing. But watch out; chains such as Shopper's Stop Hypermarkets, Star Bazaar grocers, and Tanishq Jewelers all operate loyalty programs with world-class features.
The Indian Loyalty Summit brought together most of the operators of such programs with over 250 of the globe's foremost thought leaders to share the state-of-the-art in “driving loyalty through customer experience management.” Several of the best presentations over the jam-packed two-day conference were given by Indian loyalty practitioners themselves. They offered street-level insights and pragmatic solutions for a chaotic and competitive retail environment lacking the so much of the infrastructure that we in the developed world take for granted. Here are a few of their insights that we can't afford to ignore:
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Manish Jain, Chief Marketing Officer for GE Capital's SBI Cards Group, pointed out that the U.S. loyalty market may be a poor standard for Indian marketers to shoot for, in that three-quarters of us carry loyalty cards but the typical consumer business here loses 50% of its customer base every five years. He urged the audience to re-focus their efforts on getting business and brand fundamentals right, which is a function of seeing loyalty as an enterprise-wide operational strategy, not just a Marketing concern.
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Vinay Bhatia, VP of Marketing and Loyalty at Shopper's Stop, stressed the mission-critical need to see customer data as the lifeblood of loyalty marketing. “Consumers don't buy your brand because of the card. The point is to use the data to drive actions that enhance the relevance and convenience of your brand.” He went on to say that while data analytics is vital to drive insights, “you don't need a Ph. D. in statistics for loyalty. Besides, our focus should be on improved decision making, not merely insights.”
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Kartik Jain, EVP of Marketing for HDFC, one of India's large banks and credit issuers, made the case for advanced lifecycle management. At the same time, he was an advocate of keeping things simple. Since Indians typically have 3-4 savings accounts spread over multiple banks, loyalty in his case involves consolidation of those accounts with HDFC. By asking his customers to provide just their age and income, he has been able to build an effective lifecycle segmentation strategy for the bank.
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Shubhranshu Singh, Marketing Director for VISA in India and South Asia suggested that many loyalty programs in India, while new, are already showing signs of undifferentiated commoditization. Without a real emphasis on soft benefits, many of these programs will fail to deliver the incremental revenue lift to justify their cost. In fact, Mr. Singh maintained that the missing ingredient in most programs that the best ones seem to embody is “love.” (Love as cheerful service reflecting the uniqueness of their brands for customers).
Does any of that sound familiar to us in the “developed” loyalty markets? Sure it does.
And speaking of love, just in time for Valentine's Day, Sandeep Kulhalli, VP of Marketing & Retail at Tanishq, India's leading jeweler, gave a tour de force presentation full of great insights about operating a winning program balanced with hard and soft benefits that deserves its own blog post. Tomorrow, I'll mine the sophisticated relationship and recognition benefits of their Anutarra loyalty for pearls of loyalty wisdom.
Jim Sullivan is Partner, COLLOQUY
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