Make Rewards Programs Simple, Relevant

Starbucks is streamlining its Rewards program in December, consolidating the two different programs it has now (one free, one fee-based) into a single program with tiered rewards. Good move on Starbucks’ part, a move that is long overdue. Each program offered certain perks such as the fee-based Gold program’s 2 hours of free wi-fi internet access per visit. At $25 per year, Starbucks realized $17.5 million from Gold card membership fees between November 2008-March 2009. With results like that, what was the motivation to consolidate the programs?

Reward programs should be rewarding to customers, not marketers! I posed a challenge to students in my Promotion class earlier this semester, asking them to critique Starbucks’ two-card program. Although they had been in class less than 3 weeks at the time, they already understood something about promotion: incentives should be structured so that they entice customers to take action. Students were nearly unanimous in their belief that Starbucks’ program did little to drive sales.

Customer reward programs are valuable for maintaining brand loyalty and even increasing customers’ purchase volume. Their impact can be maximized by keeping them simple and providing rewards that customers value and can access conveniently. I recall a rewards program for Baja Fresh restaurant in which I was enrolled. it gave a $5 discount for every $100 spent with the restaurant. A decent reward, except one had to go online and enter a 20-digit card number (no exaggeration – I counted) to access the reward. I thought that was bad, but it got worse when Baja Fresh ended the program. Not coincidentally, my visits have dropped substantially.

Marketing Daily – “Starbucks Reward Change Signals Strategy Shift”

Mobile Marketing Key to Multichannel Strategy

Mobile is where the future is for customer interaction, according to a study by Forrester Research. Evidence cited to support the conclusions of the study include 36% of persons surveyed access the Web daily from their mobile devices, and 25% use their mobile devices to research products. The trend toward increased mobile device usage further challenges marketers that are struggling to keep pace with other trends such as greater broadband access and the explosion of social network participation. According to another Forrester study, only about 1/3 of marketers believe they are capable of delivering a consistent customer experience across all marketing channels.

Unfortunately, it is possible that too many marketers view mobile marketing as a fad used by only a small percentage of the population. The Forrester numbers on Web access via mobile devices suggest otherwise. As smartphones such as the Motorola Droid and Blackberry Storm 2 hit the market, it will likely fuel interest in a category already stoked by the Apple iPhone. Another reason that marketers may be holding back on mobile marketing efforts is that if their scope of operations is a local geographic market, they may feel the impact or ROI of mobile marketing would be too small to matter. This rationale is similar to what many small businesses expressed 10 years ago about web sites and more recently, a branded presence on social networking sites.

Embrace mobile marketing, not because it could lead to incremental sales (although it could), but because it is where more customers are conducting their business! You would not open a store in a location that draws very little traffic- you would locate where the customers are. The approach to channel strategy should be no different.

Online Media Daily – “Forrester: Mobile Will Become the Hub of Multichannel Customer Relationships”

Think Like Customers When Using Search Engine Advertising

You know the adage that “the customer is always right.” I do not necessarily subscribe to that view, but I certainly believe that we have to understand who our customers are and put ourselves in their shoes. If we do not think like customers, we cannot fully appreciate their perspective. The above statements are rather broad, so how about an example to illustrate the point from search engine advertising.

Susanna Speier shares on the blog Search Engine Journal that a post she made this spring about Daylight Savings time increased the amount of traffic to her blog by over 500%. What was the secret- useful tips on how to transition to Daylight Savings time? No, not really. Was the increased traffic just good fortune given the timing of her post coincided with the time change? That’s part of it, according to Speier. The key? A misspelled term. Speier deliberately used the term “Daylight Savings Time” as opposed to the correct form “Daylight Saving Time.”

Why knowingly use an incorrect term? Simple- the incorrect form was entered as a Google search term about 3 times more often than the correct form. Rather than earn points for proper spelling, Speier experienced a sharp rise in blog traffic by using a term most people use. This tactic enabled the search engine to find her blog posting and connect Speier with people seeking information on the time change. Speier’s experience reminds us to think like customers when we are talking them.

Search Engine Journal – “Daylight Savings Time 2009 Optimized”

What Drag Racing Can Teach Us About Business

I ran across the story of the American Drag Racing League recently. This five-year-old entity is thriving during a time when most sports properties are struggling in the face of the recession. ADRL’s revenues are projected to hit $12 million this year, a 100% increase over 2008. An enviable growth trend, indeed! What makes this growth all the more amazing is that ADRL has virtually no ticket revenue. It gives away tickets in return for attendees’ names and e-mail addresses.

THE ADRL story is a great lesson for businesses in any industry, not just sports. Business success is driven by coming up with game changing ideas and mindsets. The one aspect of ADRL that fascinates me most is CEO’s Kenny Nowling’s view that “our product is our fan, and the customer is our sponsors.” What a unique way to view a sports property! Rather than beating its head against a wall trying to sell tickets in a competitive, economically challenged market, ADRL realized it could harness the value of fan access and monetize it.

Just because no one else does something a certain way is not a reason that your business cannot entertain the thought of playing by different rules. Time will tell if the ADRL model works long-term, but it certainly has given the league a chance to succeed.

CNBC.com – “League Gives Away Tickets, Sees Big Growth”

Putting Profit First… Even Over Market Share

Market share is the holy grail for many firms. The more customers one has or the more units it sells, the better off it will be than its competitors. Sometimes, that reasoning plays out, other times it does not. Market share is relatively easy to build. I liken building market share to the insecure guy who buys rounds of drinks for everyone at a bar. He has lots of friends (i.e., market share) as long as the drinks are flowing. When his fortunes change and the money to buy drinks is gone, so are many of his friends. At that point, the money the poor guy has little to show for his investment.

The relationship between market share and profit works the same way. A company can build market share but do it in a reckless manner that hurts profitability. Ultimately, a business is striving to maximize profits, not the number of friends it has! Be cautious in foregoing revenue to gain market share via a low selling price.

In a recent interview, Dell founder and CEO Michael Dell indicated that a strategic shift in his company is emphasizing profits over market share. He is willing to give up Dell’s second place standing in PC market share if it means greater profits per unit sold. Dell summed up the strategy when he said “Do we want to sell the most numbers of units? No, we want to have the most profit.” That mindset will serve any organization very well.

Bloomberg.com – “Dell’s ‘Reshaping’ of PC Maker Means Chasing Services”

Affluent People Like Deals, Too… Maybe That’s Why They’re Affluent!

The country’s economic recession tightened the purse strings of many households. In some cases it was out of necessity as job layoffs or reductions meant less money coming in. In other cases, consumers were being more cautious with expenditures knowing that there was much economic pain being felt by other people. In response to the recession and accompanying consumer pullback, a surge in coupon usage and offers was observed. Consumers sought to save money, and marketers wanted to offer incentives to nudge buyers to take action.

It is tempting to generalize that coupon usage is a practice found mainly in middle and lower income households. After all, they need to save money more than high income households. It turns out that such an assumption is incorrect. A recent study done by Harris Interactive found that a higher percentage of persons with household income of $100,000-$149,999 reported using coupons from newspapers, Internet, and magazines than persons with incomes below $100,000. The most interesting finding was the use of the Internet as a source for obtaining coupons. Two groups of affluent consumers, incomes of $100,000-$149,999 and $150,000-plus, reported greater use of online coupons than the overall population (51% and 53%, respectively versus 40% overall).

Marketers targeting affluent segments should realize that just because these customers have more money does not mean they are less interested in saving money or receiving added benefits via coupon offers. It seems there is greater potential in targeting this audience with coupons in terms of coupon redemption as well as buying power. In particular, these consumers look to the Web for incentives to buy. Affluents are affluent for a reason: they understand spending less money than you take in builds weatlth. Thus, it is not surprising that many of them are coupon users. Respond to them with offers that compel them to buy!

eMarketer – “Web Coupons a Hit for the Affluent”

Understanding Non-Clicks of Online Ads

The 80-20 rule is effectively used to make the point that a large majority of activity (sales, productivity, etc.) comes from a small minority of people. While percentages do not come out literally 80-20 every time, the point is well taken that most results are generated by a few people.

The principle behind the 80-20 rule applies to consumer response to online advertising. Research by comScore reveals that 85% of clicks for online ads are made by only 8% of Internet users. So instead of 80-20, clicks for online ads follow an 85-8 rule! Furthermore, 84% of web users do not click online ads.

What should we take away from these findings? Reduce spending on display ads online? Such a response might be understandable given 84% of web users do not act in the way we desire, but that would be the incorrect response. While click-throughs provide a measure of an audience responding to an ad, do ads that are not clicked still have an impact? The answer seems to be “yes.”

Related research by comScore has found online ad presence is related to greater brand-specific searches, increased visits to brand web sites, and increased online and offline sales. Notice that these outcomes are related to ad presence, not ad clicks. Thus, online ads appear to be noticed and processed by consumers, even if most of them do not take the action of clicking ads for more information and brand engagement.

Center for Media Research – “8% of Internet Users Account for 85% of All Clicks”

Negative Words Elicit Desired Response

Creating copy that elicits the desired response from consumers has been a challenge for advertisers for as long as there has been advertising. What are the magic words that move message recipients to take action? If only it were that easy; there are no magic words, unfortunately. However, the types of words used could influence a response. According to a UK study by the UCL Institute of Cognitive Neuroscience, people processed negatively worded information that they were shown for a fraction of a second more accurately than positively worded information. Researchers concluded that people are more attuned to negative emotional messages.

What are the implications of these findings for advertising? Two directions one can take these findings. First, copywriters and ad creatives should consider whether a message that is typically worded in a neutral or positive manner can be worded using negatively charged words instead. An example given by the UCL researchers is the message “Slow down” might be more effectively worded “Kill the speed.” The negative emotion associated with “kill” could have a greater impact than a plea to “slow.”

Second, the practice of comparative advertising seems to be a prime candidate for application of this study’s findings. For example, an upstart company that paints the market leader as “a big monster” might more effectively contrast differences between the two brands as opposed to a straightforward comparison of the two brands. Political advertising seems to have already be ahead of UCL on this one, with attack ads often demonizing an opponent rather than focusing on superiority of a candidate.

Will we see a dramatic swing in ad copy and have negatively worded ads be commonplace? If advertisers buy into the UCL study’s findings, negative could become the new positive. In an environment in which any edge to break through message clutter is sought, a shift in the tone ad messages may be worth pursuing.

University College London – UCL Study: Subliminal Messaging ‘More Effective When Negative’

Brett Favre on Branding

I have a confession to make: I believe I am falling under the spell of Brett Favre. I have resisted the urge for years, but I have finally succumbed to his magical powers. As I watched the nearly 40-year-old quarterback carve up his former team, the Green Bay Packers, I thought about the qualities Favre exudes. Brett Favre’s mystique offers lessons that can be applied to branding, whether it is personal branding or managing a product brand. Here are four characteristics (would you expect any other number?) of Favre’s personal brand that any brand would benefit from possessing:

1. Distinctive – There are other quarterbacks, some of whom are very good, but there is only one QB with Favre’s style. He is not different for the sake of being different (like Cincinnati Bengals WR Chad Ocho Cinco), but he is genuinely different. Relevant difference is a key to winning in business and in life.

2. Consistent – Favre’s performance level has not changed dramatically over the years. His style of play is basically the same, and he shows up to play regardless of pain or injury. Brands must be consistent, too. When one encounters your brand, there should be no question about your identity and values.

3. Passionate – Favre cares deeply about what he does. Maybe that is one reason why he has had difficulty retiring from the game. He digs down and delivered some of his greatest performances when in the spotlight as he was against the Packers on Monday Night Football. Brands with passion resonate with consumers and the public. Authentic passion is noticeable; pretending to be passionate is not necessary!

4. Fun – Why is this guy smiling on the field when there are 11 people trying to hit him and hit him hard? He’s having fun at what he is doing. While carrying out 1-3, never lose sight of why you are doing what you are doing. What’s your purpose? What’s the mission you have set for the organization or yourself?

Thanks, Brett for the branding lesson. Now, if we could only get John Madden’s take on what we can learn about branding from Brett Favre!

Value Does Not Always Have to Equal Low Price

Value- it’s the mantra marketers chant to persuade buyers to select their offerings. We like to assume we have a good understanding of what customers expect when it comes to value. A tendency exists to equate value with low price. The judgment that a product provides “good value for the money” even suggests that our brand does not have to be the lowest priced option to be perceived as a good value. But, price too often is the measuring stick used to make determinations of value. Even in difficult economic times, price need not be the lone source of customer value.

Value judgments are based on a comparison of benefits offered by a product or service with the sacrifices required to acquire it. Managing customer value from this perspective suggests we have but two options to enhance value: increase benefits or decrease sacrifices. Again, the tendency is to decrease sacrifices (i.e., lower price) because who wouldn’t want to pay a low price? That assumption overlooks that value can come from reducing other sacrifices (e.g., fast delivery or favorable credit terms) or strengthening benefits offered.

An example of delivering value via benefits comes from Kraft. It is charging 99 cents for its iFood Assistant iPhone application. Giving the app away could be a way to encourage more users, but Kraft believes the value the app delivers as a resource for consumers via a mobile platform justifies charging a nominal price. Value is correlated with relevance. A brand that is relevant to consumers delivers value. Before succumbing to the temptation of creating value through low price, consider all other sources for enhancing value so that it is not created at the expense of profits.