Friday, March 11, 2016

Loyalty Program? You Don’t Need No Stinking Loyalty Program

Loyalty is a hot topic in many industries, especially the restaurant industry. Starbucks recently overhauled its loyalty program. McDonald's is reportedly about to roll one out. But if your company is considering launching a loyalty program, allow me to make the case that your time and effort are almost certainly better spent elsewhere.

What Is a Loyalty Program?
I'm defining "loyalty program" as a program that rewards customers with freebies for making purchases at a business. 20 years ago, this was often handled with a punch card: "Buy nine scoops of ice cream and get the tenth one free." Today, this is very often handled digitally.
 

The rise of digital loyalty programs has muddled the definition of a loyalty program. Free rewards are often mixed with other features like online ordering or mobile payment. If you take away only one thing from this post, let it be this:
When it comes to "digital loyalty programs," do not confuse the benefits of added convenience measures like online ordering with the unproven tactics of rewarding customers with freebies for frequenting a business.
The Wrong Reasons for Wanting a Loyalty Program
Let's look at the most popular reasons businesses probably want a loyalty program. I'll poke holes in every one of them:
  1. "A loyalty program increases sales."
    In the ground-breaking book How Brands Grow, author Byron Sharp scientifically proves that across nearly every industry, loyalty programs do not increase sales by a meaningful amount. You can read the book for yourself, I highly recommend it.
    Here are two more anecdotes: Chili's restaurants launched a loyalty program in 2015. The program rewarded customers with freebies for frequenting the restaurant. While the loyalty program figured into 16% of transactions, the company revealed that it did not lead to sales increases (source).

    I recently sat in an executive round table discussion with some of the biggest restaurants brands in the country. Every one of them talked about how they had recently made big bets on rolling out a loyalty program. When I asked them if the loyalty programs had led to increased sales, each one either said no or that they couldn't prove that they did. 
    Add these anecdotes to Byron Sharp's empirical evidence and you have a pretty compelling case that by and large, loyalty programs do not materially increase sales. There are exceptions, but the odds are definitely against your loyalty program.
     
  2. "A loyalty program will give us valuable customer data."
    This is true. But you do not need a loyalty program to gain customer data. There are plenty of other ways to do so. Offering a small incentive to customers for signing up to receive emails is a great way to gain data. So is offering a mobile payment solution. You don't need a loyalty program to do either of these.

     
  3. "Everyone else has a loyalty program."
    There are some industries in which loyalty programs are so ubiquitous that they are essentially required in order to compete. The airline and hotel industries fall into this category. But for most industries, this is not the case. Even the travel industry would agree that the biggest flaw in their loyalty programs is that past purchase behavior doesn't always indicate future behavior and frequency.

     
  4. "A loyalty program will reward my best customers and keep them coming back."
    Of all the reasons your customers are loyal, earning free stuff is not at the top of the list. Byron Sharp has proven that. Instead, your customers will be loyal if you focus your attention on offering incredible products and services. Exceeding your customers' expectations over and over again is what drives loyalty, not giving away freebies.
Focus on Convenience Instead of Freebies
There are better ways to drive sales than offering freebies to your best customers. One of those ways is giving customers more convenience. I define convenience as "eliminating friction in the buying process." Let's look at two reasons why added convenience measures lead to sales growth:

  1. People will pay for convenience.
    This has been proven time and time again. Look no further than the early days of Amazon Prime. Amazon charged customers a premium to receive "free" faster shipping. See this post for three more examples.

     
  2. Removing friction in the buying process leads to increased sales.Again, there are plenty of examples, but my favorite comes from Disney. Disney has a mountain of resources at its disposal, but they have chosen to invest them heavily in offering customer convenience through their MyMagic+ technology platform and the MagicBand. The MagicBand makes it extremely convenient to buy things within Walt Disney World. You pay for everything with your magic bracelet no need to carry cash or a credit card around. After it launched, Disney Executives specifically cited the platform as a key reason for increased sales. 
Add This To Your To-Do List
It's time to re-think loyalty programs. If you already have one, focus on adding measures of convenience to truly increase sales. If you don't have one, consider adding measures of convenience before offering freebies to your best customers.

There's never a lack of ideas.

Sunday, February 7, 2016

#Super Bowl #Hashtags 2016



In what has become an annual tradition here at the Never a Lack of Ideas blog, I monitored all of the Super Bowl commercials and kept track of all of their hashtags. For the first time, I noticed a sharp decline in the number of ads that had hashtags tied to them.

And, Super Bowl advertisers have obviously been reading my blog because we saw far fewer random hashtags this year than in any year past. After all, the best hashtag (if you really must have one), includes your brand name.

Take this year’s quiz — it’s just 10 hashtags — and leave your score in the comments below. Good luck! 

Add This To Your To-Do List
Take last year’s quiz
and bring back fond memories of hashtags you couldn’t even remember immediately after last year’s game.

I've posted the answers to this year's quiz in the comments below.

There’s never a lack of ideas.

Thursday, January 14, 2016

Friendly Reminder: Consumers Aren’t Rational

Well, it's over.

Powerball madness has ended.

Three winning tickets will split the $1.6 billion and we can all go back to our daily lives.

This was a good reminder, though, that people aren't rational. If we were, we wouldn't buy Powerball tickets. With the odds of winning at 1 in 292 million, even with 100 tickets, your chances are still basically zero.

As I was irrationally standing in line to buy my Powerball ticket, the cashier told me that earlier someone had bought 500 tickets (for $1,000) after selling his car and using all the money to buy lottery tickets. We now know that he didn't win the jackpot or $1 million. If that's not irrational, I don't know what is.

Life can get back to normal now. Until we get swept up with the next irrational thing. I can't wait.

There's never a lack of ideas.

PS. My Powerball ticket is pictured here. We won $4! By spending $10....

Monday, November 2, 2015

Four Rules for Winning in the Convenience Economy

There are several names for the shifts we're seeing in many industries today: some call it the rise of the Sharing Economy. They point to businesses like AirBNB and Uber as pioneers. The Harvard Business Review calls it the rise of the Access Economy and points to Zipcar as a trailblazer.

I call it the rise of the "Convenience Economy" and I've included three examples below. Here's my definition of the Convenience Economy:

Businesses winning in the convenience economy are adding convenience by eliminating friction in the buying process.

Four Rules
I see four rules for winning in the convenience economy. The most important one is the last:

  1. Convenience is more important than price.
    Customers have thus far demonstrated they are willing to pay extra for convenience. The cost of convenience hasn't been driven to zero... yet. Unlike many other industries in which costs have been driven to zero (free email providers, free news via websites, free shipping, etc.), people have demonstrated they are willing to pay for convenience.
  2. Convenience does not appeal to everyone.
    The convenience economy is not being brought to the masses. Approximately 16% of Americans live below the poverty line — defined as a household income of $24,250 for a family of four in the year 2015. And according to the US Census Bureau, the median household income in the US in 2014 was $53,657.

    In my very unscientific opinion, this means at least 16% and perhaps even more than 50% (the median) of Americans cannot afford the price of convenience, in general terms. The convenience economy appeals to the middle class and up. There are some people who simply can't afford to take an Uber ride or have their groceries delivered by Peapod.
  3. Mobile devices are powering the convenience economy.
    Smart phones are enabling new methods of consumer convenience. Businesses winning in the convenience economy are taking full advantage of mobile technology: voice, text, photos, videos, geo-location, etc. This isn't to say that the only way to add convenience is via a mobile device, but it's certainly a good way.
  4. The strongest brands will win.
    The Paradox of Choice tells us consumers cannot deal with an overwhelming number of choices — they need to pick from just a few options. So, while there has been a proliferation of businesses tapping into the convenience economy, only the strongest brands will survive. "Strongest" means many things, including most trustworthy, most unique, most consistent, and of course, most convenient.
Three Examples
Here are three of my favorite recent examples of companies that have added levels of convenience in order to make their customers' lives easier and increase sales:
  1. Artkive Concierge. Artkive is a cool app that enables parents to take pictures of their children's artwork, organize it, and then print picture books of the artwork. It's a great app if you have the time to take a picture of all of your little one's artwork. But if you don't have the time, you can take advantage of their Concierge service. Just pile all of little Johnny's artwork in a box of your choice — in any order — ship it to Artkive, and they'll take pictures of every piece, lay it out nicely in a book, allow you to give feedback, and then print and send you a book. They'll even return the artwork to you when it's all said and done. I've used the service and it was fantastic.
  2. Angie's List SnapFix. Sometimes you need some work done on your home and you don't have time to research the best company for the job. Enter Angie's List SnapFix. Members simply describe their problem with text, photos, and videos (most easily done via their app), add a date and time in which they're available for service, and Angie's List goes out and finds the best company to handle the job. I recently used the service for a hodgepodge of home repairs I needed done and it was great.
  3. Dominos. Many restaurants offer online ordering, but Dominos leads the way in convenience via their digital channels. Their mobile app is fantastic. And for their most tech-savvy customers, ordering via emoji is the most convenient way to order a pizza. While at first glance this seems like a gimmick, it truly is a very convenient way to order a pizza. It certainly reduces all friction in the purchasing process.

    According to their website, more than 50% of all Dominos orders come through their digital channels. Customers clearly like how convenient they make ordering a pizza.
Add This To Your To-Do List
How is your business taking advantage of the convenience economy? It's not too late to eliminate friction in the buying process and boost profits.


There's never a lack of ideas.

I'm not the first to call this the Convenience economy. In 2014, Box CEO Aaron Leevie Tweeted the first explanation that I've seen: "Convenience economy" formula: take a service that was previously cost prohibitive for most (due to friction) and bring to the masses." I love his use of the word "friction."

Saturday, September 5, 2015

To Whose Wagon Will You Hitch Your Star?

I've heard my fair share of sales pitches over the last nine months.
I've explained our marketing strategy to reps from all types of companies.

I've weighed the pros and cons of their proposed solutions.

And I've selected the best ones.
In making those decisions, it always came down to one question: to whose wagon will I hitch my star?

In other words: On what solution do I have enough faith to stake my reputation and my company's reputation?

If you're a marketing solutions provider, I hope you're trying to answer that last question.

There's never a lack of ideas.

Wednesday, June 24, 2015

All Roads Lead to Vertical Integration

As companies mature and look for new ways to increase revenue, they inevitably look toward vertical integration.

Companies with great customer relationships move up and/or down the purchase path to increase revenue. Let's look at three examples of vertical integration in the travel sector: one historic, one current, and one I predict will happen soon.

Historic: Why Airlines Sell Vacation Packages
The majority of people planning to take a trip that includes a flight will start planning their trip by researching flights first. Before most people look into booking accommodations, a rental car, and/or activities, they look into flights.

Many years ago, airlines figured this out and started selling vacation packages. Since customers started planning their trip on an airline's website, the airlines realized they could sell other services while they had customers' attention. (They also make a lot of money by selling hotel rooms.)

That's vertical integration.

Current: Why Google Created Hotel Finder
15 years ago, Google started teaching Internet users that to find what they were looking for online, they should start by searching Google. Plenty of people still use Google, but when it comes to booking travel, some people turn first to sites like Expedia, Orbitz, or Hotels.com.

As a result, Google has started providing more than just links as results from hotel-related searches. Google created google.com/hotels to keep users coming back to Google to find hotel rooms. Google continues to improve this service and I think it's great (but I'm a little biased).

That's vertical integration.

Next Up: Airbnb
Airbnb is reportedly worth billions of dollars. While Airbnb has plenty of room for growth in its core business of connecting those looking for accommodations with those looking to rent out their accommodations, I think Airbnb will inevitably turn to vertical integration for growth. I see a future in which after booking accommodations on airbnb.com, customers are then offered deals on activities and tours near their rented room.
  • Want a private chef to come cook you dinner while you're on vacation? Add it to your Airbnb reservation.
  • Need an in-room massage? Add it to your Airbnb reservation.
  • Need a pet sitter for the afternoon? Let Airbnb recommend a few for you.
In a home away from home, Airbnb has an opportunity to connect people with the services they're used to or services they never receive at home.

That's vertical integration.

Add This To Your To-Do List
Is your business looking to vertical integration for growth? If not, maybe it's time to start.

There's never a lack of ideas.

Sunday, May 10, 2015

Thick Skin

So you want to be a marketer? Then you better develop thick skin because critics are everywhere.

Recently, a restaurant chain with which I'm quite familiar started a new Birthday Club. The premise is very simple: register online with your birthdate and email address and you will receive a voucher for a free piece of chocolate cake on your birthday. Here were two of my favorite responses on Facebook about the Birthday Club:
  • "Pass. If I wanted to donate to the GOP, I'll do it directly. I'm not interested in funding the GOP via your restaurant's deep campaign pockets. Or at all. You keep your cake and I'll keep my conscience."
  • "Takes such little imagination to please people nowadays! Cake will bring me to your restaurant? Please I have integrity."
Add This To Your To-Do List
You can't please everyone, so don't even try. Critics are everywhere and let's be honest — some people are just crazy. Develop thick skin and ignore the haters. Stay positive and keep moving forward.

There's never a lack of ideas.