Retention and Relationships

Remember when we used to think of the web as an interesting place to read what a company wanted to tell us?  Now we can watch movies, get real time feeds from many sources simultaneously, buy practically everything, manage companies, and entertain ourselves for hours (or days or weeks) on end.

Social has that same feel, doesn’t it?  Where the user base has entered the late majority, where there is a critical mass of interesting content, and where the apps growing up in the fertile soil of social foundations (Facebook, Twitter, OpenSocial, etc) are finally getting interesting.

To me, its clear we’ll look back on these last 2 years of the social boom as just the beginning, just as browsing brochure-ware sites was in the mid-late 90′s.  The ideas coming out of retail, CPG, manufacturing, financial, and travel make it obvious there will be an explosion of new ways for people to interact with people or companies.  Wish I could share what I hear but an NDA is still an NDA.

Part of the reason there hasn’t been a post in almost 8 months is that I’ve been on the road for practically all of those 8 months.  At last estimate, I’ve had 23 trips in the last 27 weeks to such hotspots as New Jersey, Utah, Oregon, Chicago, and Philadelphia, to name a few.

What all this travel has done is re-acquaint me with the joys of frequent flier programs and access to key seats.  Now I crave Economy Plus on United, fly Delta, AirTran and Virgin America primarily to get wi-fi, and travel with 2 laptops (one small enough to work on) when I don’t get a prime seat assignment.

If United could just keep its prices within a few percent of every carrier, I’d shift to them every time.  Realizing this and its impact on my behavior is a great reminder of why loyalty program and status still play such an important role in relationship marketing.

It’s pretty clear that this holiday will be brutal for some retailers and great for consumers.  Merchants are going into this holiday season much better prepared than in 2008, when most assortments and marketing had already been planned and placed when the Lehman Brothers bankruptcy on September 15, 2008 crippled the banking system and the economy seized up in response.

What are they doing?  From what I’ve seen, I’d characterize the changes in three categories:

1)      Leaner inventories – The bulking up that normally precedes December appears to be far more muted.  Fashion items are coming in lighter, with companies ready to fall back on basics in the last weeks before Christmas if necessary.  10/25 shipments are where most Black Friday goods are shipped, so we’ll really see what inventories are like in another week or so.

2)      Earlier promotions – Last weekend looked a lot like a December weekend in terms of promotions and sales.  It looks like everyone is on the same page and ramping up the noise level early to tap into holiday budgets even farther in advance.

3)      Lower risk tolerance – This is more subtle, and shows up in many places.  From what I’ve seen, it looks like trusted brands, proven categories, and quantifiable marketing are all in vogue.  Expenditures need immediate return these days, since its almost impossible to take on debt to finance long term initiatives.  There is a little risk-taking at the margin (just enough to add a splashy item or two to advertising), but almost everyone appears to be hunkering down with their safest bets and preserving cash.

As we go into a second weak holiday, it’s likely there are a lot of companies that have been slowly burning through cash that may be in dire straits come January.  With the debt markets essentially closed to small and mid-size businesses, there may not be enough lifelines to keep everyone afloat through 2010.

In an ideal world consumer confidence comes back enough to keep the worthy players going, the worst locations get shut down and converted to housing (infill is good – more density around the remaining locations and less rural land turned into subdivisions), and the debt market finally loosens enough to let CFOs do their jobs.

…is my latest post at VentureBeat’s Entrepreneur Corner.

My intent was to make sure entrepreneurs confronted the fact that in the vast majority of cases, they are taking market share or spending from someone else, so must plan accordingly. Start with a great product or service, but understand how to keep customers engaged.

If there’s one unexpected mental shortcut I’ve learned from examining dozens of corporate loyalty efforts and customer databases, its that just about any idea will work for 20% of customers. The problem for marketers? You can’t predict which 20% with a lot of certainty, and there’s only partial overlap between any particular 20%.

Price promotion? 20% (probably more, but you get the point)
Loyalty program? 20%
Recognition? 20%
Special event? 20%
Early access to new releases? 20%

The list goes on. A few get more, many get less, but 20% is a good rule of thumb. Why 20%? Hard to say, but that’s what the data says.

The takeaways?
1) Incorporate as many interesting ideas as you can manage effectively, since each will produce results. But don’t stretch too thin, or all of them will drop off.
2) Choose ideas that do not overlap, to ensure maximum return and responsiveness.
3) Budget has an impact, no doubt. Stack ranking from cheapest to most expensive isn’t a bad idea.

There’s a whole separate group of initiatives that only 1% will respond to…that’s for a later post.

Did an interesting interview with the CMO Council as part of their loyalty research initiative at loyaltyleaders.org, which will show up in their report in a few months.

As with most interviews, some stuff comes out that wasn’t planned ahead of time. But what stuck with me were my comments to focus on just a few social media/marketing options vs. going after many. So I wanted to expound a bit.

Many companies are paralyzed by social media and how it relates to customer retention. Like anything else, start simple. Pick one area and start, learning more and determining how to incorporate the results into daily operations. Over time, the relationship between actions and results will become clearer, and you can make the business case for increased (or decreased) investment.

Once you master one, add another and go through the same process. It doesn’t have to be difficult. What seems to cause so much uncertainty is the proliferation of options that all appeared at once. So my guidance is to simplify, start narrow, and expand over time.

My latest at VentureBeat’s Entrepreneur Corner.

This was an interesting article, primarily since it was very focused on a specific task – generating a second sale.  While repeat visits often happen naturally, nudging customers to return is often necessary.  The second purchase is incredibly important, since it identifies the customer as someone with the potential for a long term relationship.  Additional investment in the relationship will have a far higher likelihood of paying off with these customers.

Thinking about customer loyalty drivers even more, it seems there’s a fourth type – Inertial.  This is loyalty to a brand or company primarily due to a lack of willingness to change.  This is more habit or pattern than loyalty, but is still reflected in preference for one brand over another.

Marketers can take great advantage of Inertial loyalty, through a steady stream of marketing messaging and impluse drivers.  These customers will continue to respond and interact, without much prodding.  At the same time, these customers have no explicit tie to your company, so they can be persuaded to leave at any time.  Witness the 8% increase in churn at Verizon since the iPhone was introduced, which is a lot in mobile.

How do you identify this?  Not easily.  Customers who do not engage with the brand are far more likely to have Inertial or Involuntary Loyalty, although many customers with real loyalty also fall into this category.  The best way to address these customers is to migrate them to Rational or Emotional Loyalty.  At least then you have tools to improve loyalty.  Most likely your Rational Loyalty efforts will also resonate with these customers.

One point I wanted to add to a recent article was the notion of involuntary loyalty.  Many companies have this and mistake it for one of the other types – rational or emotional.  Involuntary loyalty is attachment to a provider or entity due to reasons beyond the individual’s control.  Think Comcast, Hulu, Walmart in many places, many grocery stores, Medicare, your local mass transit agency, and many others.

When there are no realistic substitutes, people are forced to choose a provider involuntarily.  With analysis, their behavior will even look loyal.  Not understanding that many people would choose to go elsewhere if they can might be fatal to many organizations.

My latest article for the web channel at Multichannel Merchant.

I think my point didn’t really get across, but its mostly my fault.  The bigger point here is the separation between loyalty and value, and that customer experience is a great driver of loyalty, which in turn improves value.  Since this is part of a longer series of columns that will eventually tie together, I’ll back and rethink this one.