Be Good to Each Other & Galvanize Customer Loyalty

Ya know, Kudos to Starbucks for their College Achievement Plan. Seriously.  The plan offers eligible full and part time employees full tuition coverage to earn a bachelor’s degree from Arizona State University.  Starbucks gets that this employee benefit will generate greater customer loyalty. I’m sure you’re thinking, “Wait, what? An employee tuition program fosters customer loyalty? She is nuts.”  Hang with me here; let me explain

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Failed Customer Centricity and a Brand Implosion: United Airlines

Like many of you I am mortified by what we all witnessed as social media exposed United Airline’s practices run amok this past Monday.  As a year-over-year 1K nearly 2-million mile United customer, I am deeply disturbed and seriously reconsidering the value of that loyalty. 

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Imagine That: Sales Increase Directly Tied to Loyalty Program

Good Day- 

Well, you know our old saw by now; we promise to increase frequency of posting.  But the fact is [A] we're honestly being hammered by a trio of major client deliverables all converging from three different parts of the country (S.F., D.C., and So.Cal.) at the same time which has us totally appreciating what an Iron Chef goes through; and [B] we just can't bring ourselves to blather; the majority of what we're tracking is worthy of micro-blogging and thus ends up being pushed through our Twitter account (and its very easy to fire off 140 chars).  But occasionally, we come across something worth a longer comment.

And so it is this morning (at least for myself.)  Its notable because one of the three client projects I am cramming on to finish has a CFO who is convinced that Loyalty programs are essentially a financial drain in that they reward people who are already committed to repurchasing.  OK.  It seems to us that for the right brand, and product or service type that's the point; switching costs are near zero, and retention marketing is everything.  So catch a whiff of this...

starbucks-card-iphone-app.jpg

Starbucks Corp.'s fiscal fourth quarter earnings increased by a better-than-forecast 34% on sales that increased by a double-digit percentage (per the Wall Street Journal).  Starbucks has recorded stronger sales trends in the U.S. than most of its competitors.  Same-store sales rose 8% in the U.S., driven by a 5% increase in transactions. 

Here's the thing: Starbucks CFO and Group VP of Global Business Services, Troy Alstead noted in an interview that in addition to accelerated drive-through times and new food offerings, their loyalty program was responsible for increasing repeat customers and rising sales. That's right: Starbucks is tying their increase in sales to their loyalty program.  From what we know of the internal workings at Starbucks CRM efforts they have plenty of analytics and data to back this up.  And presumably that's how they reached this conclusion (acknowledging there were two other factors: food offerings and drive-through improvements).  But the point here (at least for us) is clear: a loyalty program that appears to do exactly what was hoped: positively effect customer wallet-share. 

The numbers speak for themselves.  Overall, Starbucks reported a profit of $481.1M up from $359M a year earlier.  And net revenue rose 13% to $3.8B.   Hmm, a CFO reports a direct causal link between a loyalty program and business growth.  Imagine that.

Now, to be intellectually honest there is one more observation to make (and then I need to jump back to that client's deliverable) ...the key to Starbucks loyalty program invokes the two principal watchwords of the digital age: ease and convenience.  We think what makes Starbucks program so effective is not just accumulating points to earn free drinks or food, rather its the fact that their loyalty mechanism (once a card, now a phone app) makes it easy and convenient to buy and reload their digital wallet.   We'll have to muse about loyalty program vehicles another time.

 

You Know Me. Not.

So, this was an interesting one.  And kind of surprising for whom it involves, someone we've worked with before...

The numbers tell it: more than 57% of consumers prefer a personalized online experience with a brand. Results from a number of campaigns -- with personalized emails or digital commerce product selection -- support these claims, often with a significant lift

This is best practice, but legacy systems often pose a challenge for brands with established customer databases.  For example, a colleague at C[IQ] is a loyal Williams-Sonoma customer.  She buys online, from catalog, at her local downtown store, and when dispatched even on business travel. 

Her last purchase was at a Bay Area retail store, and within days she received an eMail touting a local Bay Area event.  But, she doesn’t live in the Bay Area.

This is likely a case of the left hand not talking to right hand, whereby the eMail marketing campaigns are determined solely on the location of the last purchase.  But if purchase history was connected to the eMail marketing database -- with a layer of customer intelligence -- a more appropriate message would be sent. 

Incidentally, this is an also example of failing our SMART messaging guidance, that we discuss elsewhere.

Is it complicated?  Yes, yes it can be.  But if you are going to leverage personalization, you need to do so intelligently (and smartly). Otherwise, even loyal customers will pause and think,

After all these years, you still don't know me?