If there is one point that we make over and over again talking to prospects, new clients, and existing clients, it's the importance of building flexibility into a program from the very beginning. No program can work on its own without any sort of change, iteration, or contact strategy. Programs are living things-they must adapt to changes in the customer base and the business environment.

What does this mean? Effective change is driven by three sources.

Surprise. Customers should be surprised often. You would think that every relationship marketer knows this in their bones, but we continue to see the need to remind people of this over and over. Predictability in programs is good, because customers look forward to future interactions, but there still is a role for some form of surprise to keep a program entertaining.

Engagement. There many ways that customers will engage with you and your program. It is hard to predict all the ways this will manifest. Ideally, you can build a framework for capturing activity data and have robust mechanisms for responding to those activities. Automation is crucial, but you should not take a "fire and forget" point of view on automation. You still need to incorporate a human view, changing up your responses, interactions, and channels so that when customers interact with you it's still fresh, new, and interesting every time.

Analysis. Analyzing program performance entails thinking on two levels. At the macro level, you should be examining your overall program objectives, and watching metrics that point towards meeting those objectives. In the early stages of your program, enrollment, growth of enrollment, and engagement of any type are good measures. As a program matures, you should be looking for sources of lift, that is, places where you're generating positive return on investment. Whether you take a step back every month, every three months, or every six months, taking the time to take stock and look at what parts of your program are performing is a crucial component of long-term program success. On a micro level, looking at specific campaigns, channels, engagement activities, or other basic components of your program will force you to continuously evaluate specific tactics and seek improvements, leading to ongoing changes (and freshness).

Incorporating surprise, focusing on engagement, and leveraging analysis results are all foundations to a successful and dynamic program. Whether you accomplish this through technology, personnel, or (ideally) a combination of the two; maintaining a vibrant, changing, and interesting program leads to long-term success.

While we'll save commentary for WSJ's opinion that email is over (we don't think it is, at least for many customers), the underlying issue is that marketing is much more complex than simply email, just as it is also about much more than social media.  Whichever of these media channels or strategies is more or less important is a function of a customer, a context, a time, a place and a brand relationship.  As was said long ago:  not all customers are the same.  Some may want brand friendships on Facebook some (many) don't or won't.  Ditto for ads.  (That's why mullets were invented:  business in front, party in back.  Kind of like brands in email, real friends on Facebook? Hmmm...)

Two other pieces today caught our eye and they both underscore the complexity and associated challenges facing marketers today.  One is fairly obvious though detailed in depth by none other than Peter Francese, founder of American Demographics and now head of demographic trends at Ogilvy.  The conclusion in the promotorial piece in AdAge is that there is no average customer anymore.  Perhaps this story will be on the network television news tonight.

The second and much more interesting story, also by coincidence in AdAge, is about a new report from our favorite Forrester analyst, Lisa Bradner.  In this report, coming out next week, one of the things Lisa addresses is the important reality that companies and brand managers aren't organized to effectively handle new media nor moving rapdily to adapt to, much less embrace, other new digital opportunities.  Like technology and social media and customers that don't fit neatly into demographic "target" audiences with labels like "A25-54".  Further, marketers need to be more able to do math and be able to develop and presumably use customer intelligence so as to be more accountable for results and be able to adapt and change course based on actual performance.

Now this is relevant and something we support. 

From our perspective, there is too much discussion about what is and what isn't dead or alive, and not enough discussion about customers.  For marketers, customers are the essence of social media's value.  Perhaps it should be called Customer Media - because that's who controls it, at least as far as brands go.

THE BAR IS LOW...BUT IT'S ALWAYS OPEN:  IT'S TIME TO IMPROVE LOYALTY MARKETING

"80% of Success is Just Showing Up" - Woody Allen

Everyone with an appreciation for loyalty marketing gets the 80/20 principle, as observed and cited by Vilfredo Pareto.  As we look at the landscape of loyalty programs out there, this principle is in full effect as most loyalty programs out there are of the "so what?" variety.

Yet there has never been more opportunity for connecting with customers and building business. The key is for marketers and those of us in the industry, to keep raising the bar, which heretofore has been set quite low.

This is not meant to be an indictment of the industry but rather a reflection of its youth.  As my friend and colleague Bill Hanifin noted in his State of the Industry piece a few weeks ago, we are only post-adolescent in terms of age.

Coming on the heels of the deepest recession in at least a few decades, marketers have an unprecedented opportunity.  Customers are in play.  There has been research published recently supporting the idea that brand loyalty has declined.  Clearly this is partly due to economic conditions but it's our conviction that it is also because "loyalty marketing" has been on autopilot for too many, for too long.

How many industries are there, whether retail, credit cards, travel or telecom, where there are a bunch of me-too programs?  How many programs can you think of that are truly breakthrough?  That are truly "on brand"?  And let's not forget the most important questions: Are they meaningful and valuable for customers? Are they truly generating incremental revenues and profits?

So as we consider the state of the industry, let's look at opportunities for us to grow and improve what we do - for our stakeholders and most importantly, for customers.

Setting the Bar with Strategy

"Always remember, you're unique.  Just like everyone else." - Margaret Mead

Loyalty marketing needs to be more brand-centric.  Customers have relationships with brands, not with loyalty programs.  Way too many loyalty initiatives are formulaic.  The right program for one brand should be different than the one its competitor is (or could be) offering.  Take a look at your industry and see what your competitors are doing.  Whatever you do shouldn't work for a competitor and vice versa.

Loyalty marketing needs to go beyond programs.  Too often loyalty marketing is solely defined in programmatic terms:  points and rewards, cards and key fobs, credentials and collateral.

There is certainly a time and place for traditional programs, but more often than not, there is opportunity to create and execute "programs" that are un-programs.  Whether unpublished or simply integrated into a brand experience, there is more than a wide berth of opportunity here in terms of innovative strategy and program design.

Loyalty should be more natural and easy for customers.  Make it easy rather than cumbersome as each successive touch point or transaction should make a customer feel better and better about doing business with your brand.  For those running reward programs, make rewards easy to redeem and make them useful.  Lose the excessive restrictions and don't let customers feel like they are second class because they are using a reward (it should really be just the opposite but it rarely is).

Loyalty should be integrated into the business.  Many loyalty programs are still incidental to how companies operate and make decisions.  Every day there are promotions offered to all customers and prospects indiscriminately.  This is also increasingly seen in how companies promote through social media - where they provide offers via platforms like Twitter that are as good or even better than what they offer existing customers.  We see this as detrimental to existing customer relationships.  At its most successful, companies focused on customer loyalty will weigh the impact of most key decisions - both strategic and tactical - on how they impact customer relationships.  

Last, loyalty should tie to profits.  While this should need no explanation, there are still a majority of loyalty efforts out there that are either not being measured or not being measured properly.  As a completely measurable way to drive organic growth, loyalty must be measured in terms of incremental profits.  Beyond profits, using metrics like CompCustomers^TM are essential in directing marketing investments, targeting campaigns and understanding where opportunities lie and threats appear.

Raising the Bar with Execution

"Strategy gets you on the playing field, but execution pays the bills."-- Gordon Eubanks

While the right strategy can help you break out from the competition, execution helps you stay there and increase the gap.  And when it comes to executing loyalty initiatives, one of the reasons that so many companies can offer me-too programs (and succeed) is their ability to execute.

So what are the basics that set the bar for execution?

Fake it ‘til you make it.  Companies need to at least pretend to know who their customers are, even if they don't.  And they don't do either often enough.  It's important to be presumptive about recognizing customers because at least that way you don't make the mistake of not knowing a real one.  Better to treat a prospect like a customer - assuming you can't tell the difference - than to treat a customer like a prospect.

Listen and act accordingly.  Companies love to do surveys and customers, especially loyal ones, love to respond to them.  But too often we see and experience for ourselves companies not paying attention to what customers tell them.

Think (and act) customers first.  If companies are going to be promotional, they need to consider existing customers and especially members (if they have a program) before proffering special values to prospects.  The car companies were notoriously bad about this for many years before they started offering a "loyalty bonus" to existing owners.  Specifically there are or should always be opportunities to create customer exclusives, whether they are offers, soft benefits or events.

Test and learn.  Just like the basics of direct marketing, companies need to try new things.  Different tactics, different ways to execute these tactics, and most importantly - they need to measure the outcomes.  It's simple but then again, loyalty marketing (and marketing in general) should be about breaking new ground.

Be relevant.  The biggest hurdle in raising the bar is relevancy.  Companies need to do a better job of making their brands, promotions, communications, partnerships and services more meaningful to specific customers.  Not all customers, but the specific ones that will drive growth.  When companies treat (invest in) every customer the same in terms of customer marketing, that's called advertising.

Much of loyalty marketing comes down to answering a pragmatic question that every company should ask, and answer:  How do we profitably deliver more value for our customers so that they continue to deliver more value for our firm?  None of this is rocket science but rather is about being thoughtful about how to go about your business, with those thoughts keeping the customer in mind.

While this perspective on the loyalty industry is just our opinion, there are two surveys in progress that are worth nothing and participating in.  Loyalty Leaders, an initiative of the highly regarded CMO Council, is conducting both a consumer survey and a marketer survey.  These studies will put some numbers behind the effectiveness of loyalty initiatives, from the standpoint of marketers who are making the investments and consumers who are (or are not) benefiting from them.

To participate in the consumer survey, click here.

To participate in the marketer survey, click here.

The results of these surveys will be released later this year.  As a Partner and Faculty member of Loyalty Leaders, we were privileged to get a preliminary read on the interim results of the consumer survey.  Not surprisingly, the single biggest positive benefit seen is “discounts and savings” while the biggest negative is – yes, you guessed right – “receiving too much spam email and junk mail”. 

Also interesting, in terms of program participation, the highly transactional businesses like grocery stores and airlines lead while more subscription-like businesses like internet/cable and health/fitness clubs are last. Not quite ironic but the last time we looked, these two latter categories suffer very high churn. 

The surveys will be up for a good bit more...maybe we'll be surprised.  Go fill them out and we'll report back when the results are released.

We recently attended the Freddie Awards in Ft. Lauderdale.  The Freddies have been going on for 21 years now, thanks to Randy Petersen, aka the GFOFFP (with apologies to James Brown, RIP).  It was great to see a lot of old friends and familiar faces, and it also kept this burning question above top of mind.

While we think about this question a lot, it's tough to answer, because we don't honestly believe there are a lot of great loyalty programs out there.  There are some well designed programs and there are also some well executed programs.  However, they are not always one and the same. 

The Freddies reinforce these observations.  The Best Program winners in their respective category were not the ones that also scored Best Award (overall), but rather the ones that won for Best Member Communications and Best Customer Service - dimensions focused on program execution not program design..  The categories related to program design (e.g., Best Award) went to hotels and airlines that did not win Best Program.

 Loyalty program shortcomings, especially those in the travel space, are due in part to the fact that they are all basically constructed from the same model:  Transact, accrue points, redeem for awards.  Transact enough and you can accrue at a higher rate and get a bunch of nice, soft benefits.  (And please, use our credit card, because that's the real measure of success because it brings in so much non-core revenue for us!)

Ok, enough of the cynicism.

The real value of loyalty programs lies in their ability to engage customers and enable relationship marketing.  This is where executing marketing activities based on customer data creates marketing excellence, not simply program excellence. Loyalty program success is not just about fulfilling rewards, but about continually raising the bar in terms of meaningful (relevant) communications with customers.

The stakes here are being raised. 

Customers are increasingly sophisticated in terms of their expectation of companies to properly (and intelligently) use customer data.  In order for loyalty programs to engage members, customers are requiring that brands address their individual needs and make it easier to do business with them. Again, to illustrate, the real Freddie winners took home trophies for Best Member Communications, Best Website and Best Customer Service.

 A great loyalty program is perhaps less about the program and more about how the program is used - internally and by the customer.  Providing better service to customers and more relevant communications nets a win-win for everybody

For the 2010 Freddies, we hope that   a much-needed new category at the will be added: one for the best use of social media.

Social media is requiring companies to manage far more than their brand advertising and direct customer communications like email and newsletters. Customers are in the social media space, talking about brands and sometimes even their loyalty programs.  Consider the numbers: nearly 200 people million on Facebook, soon to be (according to TechCrunch) 50 million on Twitter. The mandate to add social media participation to other behavioral customer data is beyond compelling.

Unfortunately, this year there was no mention of social media participation from the airlines, hotels and other travel-related companies at the Freddies. 

Of course, the travel companies are not alone.  Many, if not most, loyalty marketers are not keeping up with these opportunities.  Bill Hanifin made this point clear in a recent post worth reading.  Of course, it's not just social media, this includes traditional channels like email and postal mail that so many marketers, even those with loyalty programs (i.e., those that have the data!).

Those brands and loyalty marketers ready to innovate and change are the ones who will be the clear winners.  For some the innovation will be about fundamentals like relationship marketing.  The leaders, however, are and will be focused on the cutting edge of communication - to include social media and whatever new modes of information exchange evolve in the future to increase brand relevancy and customer engagement.

The three panelists were:

Joe Doyle, Administrator of the Governor's Office of Consumer Affairs for the state of Georgia

Michael La Kier, Director of My Coke Rewards at The Coca-Cola Company; and

Terry Trout, Vice President Customer Experience at Cbeyond

As you might imagine, there was a wide range of perspectives given the differing nature of these organizations and the customers they serve.  Being customer centric means different things for different companies, underscoring the idea that a company's customer strategy should be tailored specifically to that company, its customers, operations, economics and its competition.

For Cbeyond, it means refining and further developing its core competency of listening to its customers.  Cbeyond's business of serving small businesses and providing advanced telecommunications solutions is wrought with technical challenges.  

Listening to customers has enabled Cbeyond to create a culture of referrals, making it no surprise that their net customer growth was well over 20% last year.  After all, how many companies try to actually listen to customers as opposed to telling them what they "should" do? (Answer to that rhetorical question:  some do, most don't; social media makes this easier yet even then, most companies still don't actually listen.)

At The Coca-Cola Company, My Coke Rewards "is about putting a smile on customers' faces"...and being a "consumer's intuitive friend."  A brand wanting to be friends with consumers?  Smells like relationship marketing.

Part of the Coke customer strategy is, obviously, mass:  it's not about awareness it's about impressions and lots of them.  They deliver 2 billion (yes, with a B) consumer impressions on a daily basis.  If you're skeptical about that, think trucks, vending machines, signs, cups and, of course, advertising.  All of these impressions translate into customer opportunities, which is part of the company's current and ongoing challenge.

If there was a surprise during the discussion, however, it was the story that Joe Doyle told about the work he's led with the State of Georgia.  For all the hoopla about what President Obama is trying to do about making the federal government more transparent and "constituent-friendly," the real success story is right here in Georgia.

Joe Doyle, at the request of Governor Sonny Perdue, has transformed everything from the DMV to voter registration and made it all consumer friendly.  And easy.  He has taken the previously impossible task of getting a live human being on the phone to answer a question related to the State of GA and made it work to the point where Georgia's service quality is approaching levels seen by Nordstrom.

Importantly, he did this with a fairly simple strategy, starting with a top-down mandate from the Governor, illustrating the importance of top-down leadership in making progress on customer centricity.  With this mandate, Joe focused on three priorities, including being:

1. Principle centered
2. Customer focused
3. Results driven

For each of these, his approach was inside out, recognizing that it takes employees, and the right ones, to lead the effort to make things happen.  One of the common fallacies about customer loyalty is that it's not connected with employee loyalty.  WRONG.  Read Reicheld's The Loyalty Effect or Danny Meyer's Setting the Table and you'll see the clear, powerful correlation.   

Last, perhaps the most interesting anecdote came from Joe, who shared that before they got started with their work, employees at the DMV did not want to go out to lunch in their uniforms.  These employees were afraid of other diners knowing they worked at the DMV and what they might think (or do!).  This shows how acute the problem, and the opportunity were.

If you (or your employees) worry about running into your customers in a Waffle House, you'd better get to work.

While many managers and executives find the idea of CRM, customer loyalty and customer centricity a daunting challenge, the takeaways from this discussion were invaluable, if nothing else, because of their simplistic nature.  Putting customers at the proverbial "center of the page" is not rocket science.  As we learned from these successful practitioners, it starts with the basics and builds from there.

Happy New Year, belatedly.

Apologies to anyone (anyone, anyone?) who missed reading musings here but it's been kind of busy, thankfully.

Interesting things going on in the world though today we'll keep focused on the business of marketing and specifically the idea of connecting with customers.  And prospects.  And those who will never be either customers or prospects.

For those of you thinking ahead, yes, this is about the Super Bowl, among other things.  Oops. I mean the "big game" or hereafter TBG.  Sorry NFL.  

Throughout the buildup ahead of TBG there was the usual hype about who was breaking what campaign, how many units were sold, how much inventory was available, etc., for as much as $3 million for :30 or $100,000 per second.

The big question after TBG is who really got their money's worth?  Or perhaps a bigger and equally relevant question is whether anyone who did or did not get their money's worth even knows whether they did (or not).

Did anyone's advertising cause a conscious change in purchasing behavior, or a behavior at all?

From a sheer production investment, the guys who created the Doritos spot certainly did, much to the dismay and simultaneous celebration of the advertising world.  These guys spent $998,000 less than a typical Super Bowl spot and created one as good as anything that ran.  Whether it sold any bags of Doritos who knows, but people have at least talked and written about it.

The more interesting spot was Denny's offer of a free Grand Slam breakfast the following Tuesday at any Denny's across the U.S..  They actually tied their TV spot with a promotional offer and an in-store experience to generate trial from prospects, lapsed customers and current customers.  Meaning they generated trial, repeat business and yes, some dilution.  They still came out ahead.

Denny's hit a literal and figurative Grand Slam, especially relative to any other advertiser in TBG.  They got a few million customers into their restaurants yesterday, many of which were not regulars.  Hopefully those people were delivered an experience at or above their expectations and they will return.

However, as someone more left-brained than I said, "hope is not a strategy."  Ideally -- and we are idealists when it comes to customer marketing - Denny's would have an idea of who those people are and thus be able to gently and relevantly remind them to come back in and pay for a Grand Slam breakfast.

AdAge was being tongue-in-cheek calling Denny's campaign "beginner's luck".  We applaud their efforts to make a $3 million ad buy pay back but want to point out that the payback could have been even greater (and more measurable) had they given customers a bounce back offer, a way to opt-in for email, and a clear reason to do so.

So maybe not a total grand slam, but at least they did get around all the bases.

While the global markets and economies tank and (hopefully) find a bottom, we are seeing many companies taking not-so-smart approach, best illustrated by a recent quote from a retail CEO:  "Given the business climate we are trying to cut costs and grow sales."  Last time we checked, hope was not a strategy.

Smart companies will turn to their existing customers as a way to achieve growth, or at least stability. Unfortunately, too many will try and find their way out of the financial morass through "me too" loyalty programs, an approach likened to "lemmings off a cliff" by a leading industry analyst. They are choosing tactics over strategy, replicating competitive programs and probably not doing the math.

If companies are to grow their business in this climate, they have to invest in those customers that present the best potential to give them more business.  Yet too much of "loyalty marketing" is about best customers, top brand promoters, etc., making many of the initiatives in the market misguided. 

The opportunity however is in the middle. 

It is very easy to overinvest in your best customers and in some cases, it is reasonable to do this.  Where you have high value but vulnerable customers and intense competition, there is a lot to lose at the high end.

But in order to justify the investment in preserving these customers, there should be offsetting gains to fund these losses.

Here it is worth taking a look at the Presidential campaigns.  One key lesson can be taken from how both candidates are solely focused on the so-called swing states.  These states are up for grabs and this is where the candidates' are investing their marketing dollars.

In fact, if you look at www.fivethirtyeight.com, you'll see how they have nicely calculated an ROI index for the election:

Here the tipping point states are clearly "the middle" - the states that will decide the outcome and can swing in favor or either candidate and drive the victory or defeat.  They are also highly correlated with providing the highest potential ROI for the candidates' campaigns.

Although elections are more lasting than customer relationships for many companies, they always provide great marketing lessons.

Happy Halloween.

While we do not espouse the virtues of coalition loyalty programs, the more that bedrock frequent flyer programs devalue their miles, the more they open the door for coalitions and other "synthetic" currencies.  More importantly, the devaluation of frequent flyer miles makes it even more important that companies figure out the best loyalty proposition for their brand, their customers and their business.  Not for the airlines.

Given our obsession with how companies market to customers, it's pretty easy to write about examples of companies doing things poorly.  So we're going to try and point to some companies doing just the opposite - doing smart things to connect their brand with their customers.

One strategy that we steadfastly support is exclusivity.  In terms of a loyalty program, this can mean members-only offers and it can also mean an entirely unpublished program.  Given the preponderance of programs, especially ones with flimsy value propositions (or other weaknesses...wait - we committed to staying positive), we expect to see more and more unpublished programs.  It's sort of the loyalty marketing equivalent to "double secret probation."

Unpublished programs and other marketing strategies based on exclusivity allow customers to feel genuinely different and more special than non-customers, or even "other" customers who might not be quite so intimate with the brand or company.

Two brands worth noting here are Jack Daniels and Gilt.

Not long ago, I was invited to be a Tennessee Squire, an unpublished program called the Tennessee Squires Association that was started in 1956 to "honor special friends of Jack Daniels Distillery" according to Wikipedia.

While there are many spirits brands spending large sums of money doing things not so well, Jack Daniels does a positively brilliant job of using this program to build its brand and its brand ambassadors.  If you're interested send me an email and who knows, you could end up a fellow Squire. 

Another great example is Gilt Groupe, which per the public portion of its website, explains that it "is a private online community, which is dedicated to providing its members with access to coveted fashion and luxury lifestyle brands at sample sale prices."  Again, you need to be invited to join and only members can do the inviting. (yes, send an email and I'm glad to refer you!).

There are many other reasons for exclusivity and unpublished programs, not the least of which are the ability to better control costs and program size.  Even better, however, is the ability to test, innovate and ultimately create more meaningful, productive and sustainable relationships between your customers and your brand.

The timing is pretty good, as in USA Today there was a big story on the increasing financial pain being shared with (inflicted on) passengers by the airlines.

The bulk of changes at AAdvantage are added fees and mileage requirements for upgrades.  This will serve to make upgrades both more available (ok - this might be relative but it shouldn't hurt) and help the airline from a yield management standpoint, assuming it gets more business travelers to actually pay more for front cabin seats. 

One thing AA did not change were reward levels for domestic coach.  This is both smart and not surprising, as American has been way ahead of Delta in terms of mileage sale revenue to partners and they would be devaluing their miles by increasing reward levels. 

Finally, on a related note, SkyMiles today sent out an email offer of half-price tickets for Atlanta Braves games.  This follows similar moves related to their sponsorship of the Atlanta Symphony Orchestra and serves as a nice value-added "surprise and delight".

For a long time the irony of the airline industry has been that the only way they have consistently made money was through the frequent flyer programs.  Airlines have set up subsidiaries to house the programs and in some cases (Aeroplan) even spun them off into separate, publicly traded units.

As we have discussed here, the airlines make money selling miles to partners and consumers at rates that are typically around $0.02, though lower for large partners and higher for consumers.  Their "cost" on the miles when redeemed is typically well under $0.01.

So when the number of miles needed for a free ticket goes up, it effectively decreases their cost of redemption for the airline and it also lowers the value for the frequent flyers.  For example, if you can purchase a ticket for $250 and it takes 50,000 miles, as a frequent flyer you are only getting $0.005 in value (half a penny) for your miles.  At 25,000 miles you are netting $0.01 per mile.

With the new three tier system, you can expect that most seats will be priced at 40,000 though on more attractive flights the seats will be 60,000 miles.  These compare with 25,000 and 50,000 miles today.  When seats are only 20,000 miles, they will be a pretty good deal.

Of course the value is largely a function of what the ticket would cost if you were paying for it.  This is where it is imperative to do the math.  If you are pricing a ticket and it's more than $600, even at 60,000 miles it is a reasonable value ($0.01 per mile).  At 40,000 miles it's $0.015 per mile.

The other significant implication of these changes devaluing the miles is the impact they will have on the frequent flyer partnerships.  The partners are now buying miles from the airlines and those miles are, at least in our opinion, worth less with these program changes.  If you're a partner you'll want to renegotiate your deal with the airlines so that you're either paying less per mile or getting more miles per dollar you spend.

If you're a frequent flyer collecting miles from partners, especially credit cards, pay close attention and do the math as suggested above.  The market value of miles and points earned from credit cards these days is around $0.01 so you want to make sure that you are earning points and miles that are at least that valuable.

No one should be surprised about the frequent flyer program changes.  Delta has actually done a very good job in effectively "raising prices" but providing more value (i.e., last seat availability) as well as other recently announced program changes such as Pay With Miles. 

Still, frequent flyer miles are continuing their decline in value and that is not going to help an already challenged industry. 

They were standard-issue qualitative research questions but one was quite striking, not just as it relates to banks, but to so many other industries as well.

During the same week in The Wise Marketer, there was a short piece from a research report indicating that a majority of bank customers, 63%, plan to switch primary banks, with a similar percentage intending to switch insurance providers.  These numbers echo an IBM study that boldly concluded that a significant majority of customers have little or no emotional connection to their bank.

With only a small handful of exceptions, namely "ThankYou" from Citibank and the new Chase Exclusives, banks have been noteworthy in their failure to embrace what we call "whole-bank" loyalty.  Yes, there are thousands of credit cards out in the market with loyalty "features" but these are often the extent of a bank's loyalty marketing efforts.

There are a number of reasons for this, including a bank's product- rather than customer-centricity, largely reflecting being organized around products, in silos, rather than by customers.  Of course like all industries there are exceptions, including the smaller and more nimble banks (particularly those catering to high net worth individuals and businesses).

The lack of loyalty in banking is one of great irony.  While loyalty is often (and largely) a function of habit, real loyalty is driven by an emotional connection and certainly people are, for the most part, quite emotional about their money.

So the question that struck me from the bank VP Marketing?  It was simply about how I thought they should thank the bank's customers.  My answer:  the bank should figure out how to get the customers to want to say thank you to the bank! 

In order for this to happen, the bank will need to shift its focus from being product-centric and take a customer-based approach to growth.  Having a customer thank them for being their bank should be the bank's ultimate objective. 

Describing loyalty as expensive is a bit like saying that cars are expensive.  Sure it's cheaper to take the bus (mass transit), but that assumes that it will get you to where you're trying to go, on time and with relatively little inconvenience.  The bus gets "expensive" too if you're late and miss an appointment, if you have to stand, or especially if your origin and destination aren't anywhere near the bus route and you need a ride to get there!

Loyalty marketing can answer some very explicit and precise questions.  It can tell a company who its customers are as well as when, how often and what they buy.  More importantly, it can allow a company to directly address (i.e., communicate) directly with its customers and get them to buy things.

For marketers, loyalty is more like a car.  The unfortunate reality is that not everyone likes to drive or can afford a car.  It's a lot more expensive than taking the bus or the subway but (unless you live in New York City) it's much more practical and gets you to exactly where you want to go, rather than just in a general area.

So yes, compared to other marketing initiatives and disciplines, loyalty is expensive.  Like other certain other expensive things in life, it is worth it, as like so many other things, you get what you pay for.

Advertising, which still commands the bulk of marketing spending and was over $230 Billion for 2007, is only now being measured in terms of actual sales.  In fact last week Ad Age reported that (alas) a definitive study linking TV advertising to actual sales was being undertaken "to answer advertising's million-dollar question: Do TV ads make consumers go out and buy products?"

The value of loyalty marketing is driven by a number of things, including certainty (i.e., defined risk) and the outcome, which, when done right, is directly measurable revenue and profit -- with highly mitigated risk.  Unlike acquisition-oriented direct marketing, advertising or even most promotional marketing, loyalty is an investment in the means to talk with your customers for a long time.  It's what makes relationship marketing not only possible, but more effective.

The metrics for loyalty are unlike most other marketing disciplines, which tend to deal in cost per thousand impressions (again, mass transit...or marketing) versus metrics like customer profitability, incremental revenue or, at a basic level, cost per incremental sales dollar.  Yes loyalty is about selling things - usually more things to more people more often.  And that should command a premium.

So when I fell just short of requalification for 2008, I was fully prepared to be downgraded to Gold Medallion.  Lo and behold it is late February and guess who is still a Platinum Medallion!?!  Of course this is wonderful and keeps me engaged and loyal to Delta, but as a loyalty practitioner, it is compelling to point out where Delta is really missing out on a great opportunity.

When designing loyalty programs, one thing we look for is an opportunity to package and merchandise things that companies are doing that they are not getting proper "credit" for from their customers.  Things that need a bit of romancing in order to bring them to life and create more customer value.  We love the often cited line from "When Harry Met Sally" where Billy Crystal and Meg Ryan's characters are, let's say, beginning to engage in physical intimacy, and she says to him, "At least kiss me when you do that!"

Delta should consider kissing everyone that they soft land as they are not getting proper credit.  Members might feel grateful and appreciative, but they also might be thinking that Delta made a mistake and thus it's only a matter of time before they're downgraded.  Or worse they might not fully realize that their status is the same and switch carriers!

Whatever the reason (even if it is cost savings - i.e., by not having to re-fulfill credentials), Delta should take this opportunity to kiss its customers.

For too long, America's leading retailers and the investment analysts who track them have held "Comp Sales" (also known as "same-store-sales") as a sacrosanct measurement of performance.  The measure is expressed as the percentage change in revenue on a store-for-store, or comparable basis and certainly an indicator of retailer health. 

As if to call the emperor naked, over the last year or so, more and more retailers have elected to either not report these numbers or to report them less frequently.  They cite that the number is either over-rated as an indicator or too short-term in nature.  While it might be both, the real shortcoming is that it presents a shallow perspective on how the business is doing.

So, Home Depot pushed back.  So did Starbucks and Bebe Stores, Charming Shoppes, Dress Barn, Guess, Gymboree, New York & Company and Talbots.    Yet despite what these retailers are refusing to report publicly, comp sales are the key number that these companies look at internally on a daily basis!  The emperor is still in the buff.

So much for Sarbanes-Oxley and company transparency.

There's nothing inherently wrong with the "Comp Sales" metric.  So what's wrong?  If Home Depot and Starbucks are right and "comp sales" is not the key metric, what is?  Even Eddie Lampert, the hedge fund manager controlling what is left of legendary Sears, thinks there is a better metric (though he doesn't say what it is!).

Yet no one is reporting one.

Consistent with the way so many companies in the US and around the world manage their business, the traditional comp sales metric is missing the point.  If you think about what drives store-level (and ultimately all) sales, it's very simple:  Customers. 

Perhaps the most important measure of a company's organic growth and customer loyalty is not (just) comparable store sales, but comparable Customer sales, or Comp Customers^TM.  It's a metric we use when measuring customer loyalty and assessing the opportunity for loyalty marketing for a given business.

Consider that a company's customers are its true revenue-producing assets and thus just like stocks in a portfolio.  If those customers spend more, they appreciate in value and the portfolio goes up in value, the same way as if individual stocks increase in value. The other way to grow the portfolio, of course, is to add capital, or in this illustration, acquire new customers.

Just as any mutual fund or hedge fund is judged by the returns its investors receive, companies are ultimately rewarded the same way.  The better they are able to grow the value of their customers, the more the company will grow, with or without acquisition.  This organic growth is what commands a premium from investors.

Without growing existing customers, new customer acquisition is simply replacing lost revenue, rather than being true organic growth.  When existing customers are growing, acquisition drives even higher rates of growth.  When you consider how much more expensive it is to acquire rather than retain an existing customer, you understand the true importance of a metric like Comp Customers.

A few weeks ago Starbucks' Chairman and CEO Howard Schultz declared that the company would no longer report comp sales, rationalizing that the company had been too focused on improving same-store sales rather than the customer experience.  According to reports, Starbucks plans to introduce new quantitative metrics beginning in Q2.  It will be interesting to see what these metrics will be.

This concept does not just apply to retailers.  It's really appropriate to any business with customers (and what businesses don't have customers?!?). Maybe we'll see hotel companies report REVPC (revenue per customer) instead of REVPAR (revenue per available room)? 

While there are definite challenges in developing Comp Customer reporting, the value from these data and information is more than worth the effort.

It is our expectation that as more companies realize the value of identifying and engaging customers in order to build those relationships, there will be some leading companies willing to go out to the public and report Comp Customers, the same way they report other key business performance metrics, like store comps.

(c) 2008 rDialogue LLC All rights reserved.

So in the interest of making customers happier and companies more profitable, here are our top customer loyalty marketing-related resolutions for the year.  Over the next few months we hope you'll further the dialogue on these issues and others presented here.

In terms of context for 2008, there are lots of ingredients stirring the pot but there are two that are most important here - the economy and elections.  These two combine to stress out both consumers and corporations, especially in terms of their ability to receive communications.  At the minimum they add to the already increasing clutter in their minds, hearts, in-boxes, and yes, on their Facebook pages.

As with any stress or anxiety, there is only one solution:  work it out.  This means being disciplined, understanding the situation and taking action. 

There is an article in last Saturday's New York Times that is well worth reading about Amazon, now a $15 billion retailer!  To put that in perspective, that is more than 50% larger than Nordstrom, another Seattle legend in customer centricity.

In the article, Joe Nocera anecdotally relates a holiday shopping experience that he has been talking up since the holidays.  Further, it made him look at Amazon's stock price and discover that their financial performance has been stellar.  Investors are realizing the benefits of Jeff Bezos' strategy that being obsessed with customers translates into growth and profits.  Given that Bezos owns more AMZN stock than anyone, he has his, and every other shareholders' interest at heart (and wallet).

Their numbers are simply awesome:  72 million active customers who spent an average of $184 last year versus $150 the year before.  That is how you grow your business by 35%:  increase your existing customers' business by over 20%.  Simple, though easier said than done, especially for public companies.

The Amazon story is a great setup for our resolutions.

Resolution #1:  Have a strategy and be disciplined in following it.

It seems that with increasing frequency, more and more companies are pursuing tactics in search of a strategy; or, as a former boss characterized it, a "dog's breakfast" of a marketing plan.  Of course our bias is towards strategy first, and preferably customer strategy at that. 

Bezos committed to a business strategy years ago that put the customers at the center of their operation and, while it's taken some time, their performance speaks for itself.  By his own admission, Amazon is "not a great advertiser".

Lucky for them.  As it's an election year, we like to think of Amazon's strategy as "It's the Customer, Stupid."

Resolution #2:  Connect All the Dots

We see three key elements to any customer marketing plan as more important than ever when times are tough.  With deference to both Dr. Seuss and Jesse Jackson, they are:

1. Integration
2. Calibration
3. Iteration

Integration means aligning as many activities as possible, certainly marketing but also operations and measurement, so that the customer is the focus.  It means not making decisions in a vacuum and likewise, executing a consistent strategy across all areas of a business.

This is another area where Amazon excels, as evidenced by the financial challenge of giving free shipping for orders over $25, but the payoff coming from the customers increasing their average purchase to take advantage of the offer.

Calibration means measuring things so that you can support decisions like free shipping.  Calibration also means testing things before rolling them out so that you can maximize the probability of success.  Clearly Bezos was comfortable rolling out free shipping, and newer services like Prime, because their impacts were measured used to support the decisions.

Last, iteration is important because there isn't usually a straight line.   Things change, both internally and externally.  Customers don't always act the way we think they will, competitors react in a like manner, and sometimes ideas are just wrong or poorly executed.  Flexibility is one of the most underrated strategies in business and one of the most powerful.

Resolution #3:  Remember the Brand

We often cite a mantra that goes "Customers have relationships with brands, not with marketing programs."  It's contradictory for so many focused on loyalty marketing, especially those with pure direct marketing backgrounds.

Especially with companies still spending heavily on brand awareness building activities (i.e., advertising), when desperation presents itself people promote and often in an irresponsible, or at least aggressive way.

There is certainly a time and a place for promotion, but it should be done in character of one's brand.  And loyalty initiatives, connecting brand support and promotion, are no exception.

Ultimately, loyalty is about trust, and this is where Amazon's activities are ultimately brand-relevant.

Resolution #4:  Stop Mass Marketing via Email

Send less email but make it more relevant to both your business and your customers.

Content, storytelling and experience is important.  Quantity is absolutely not quality, especially when people are increasingly connected and opt-in and open rates for email continue their decline.

Further, understand and treat different segments of customers (and especially non-customers) differently.

It was pathetic to see the volume of mass emails "spewing" as the economy softened in Q4 last year and especially Holiday.  Marketers just blasted and blasted away at customers, opting for frequency over relevance.  Based on the results being released, it didn't work.

Open rates and levels of engagement will continue to decline in lieu of irrelevant dialogue and marketers desperately trying to realize sales by increasing the frequency (and telegraphing their desperation) of their email.

Resolution #5:  More Experience, Less Rewards

Loyalty marketing is still too closely connected to Rewards programs.  We are increasingly biased away from Rewards, especially when those "rewards" are things.  People have lots of things and those things have increasingly less meaning and, especially in most loyalty programs, declining in value.

Connecting the experience to any kind of loyalty proposition is increasingly the winning strategy, both for products and services.  And experiences that are brand-centric are not easily matched by competitors yet, done right, can create emotional bonds that transcend the idea of transactional loyalty.

Here's to all the best for you and your business in 2008.

While airlines often lose money in less than stellar economic times, these partner programs generate large profits for the carriers.  This has led to the airlines to consider spinning off their loyalty programs and in some cases even taking them public.  This will be a disaster for the members, as the goals, objectives and strategies of the programs will be increasingly decoupled with the idea of creating customer loyalty. 

Airline miles and hotel frequent guest points will be increasingly devalued.  Miles are barely worth $0.01 each at this point, notwithstanding new capacity controls instituted on reward travel just recently announced.  The combination of fewer award seats and hotel rooms coupled with an increasing supply of miles and points is surely a deflationary combination!

As the airlines all figured out how much money they could make doing partner deals, more and more of their frequent flyer programs ended up with virtually the same partner offerings.  Thus, the partnerships programs have become increasingly undifferentiated and irrelevant to the majority of frequent flyers. 

In one recent example, I recently received the exact same Hyatt offer from two different airlines, Delta and Northwest, who even happen to be alliance and code-share partners!  From Delta, Northwest and Hyatt's perspective, little is gained by blasting out "me-too" offers over and over to the same customers.

As we approach the holidays, there will be numerous, similar emails advocating doing your holiday shopping so as to earn as many miles or points as possible.  While that's a great idea, as every program will be doing it, what's the big deal?

At a minimum, the large travel loyalty programs should challenge themselves to look at partnerships as a tool to help them go beyond selling miles and generating accruals through partner transactions.

What if they figured out how to generate incremental trips via partners? What if they found new partnership categories, providing incentives beyond just another way to earn bonus miles.  What if they created a specific product and/or service related offering?  A tie-in with an innovative new travel company like I'm In?  (For those who don't already know, I'm In is a website that helps you organize group travel with friends.    Kind of like evite but for travel.)

Creating value for customers beyond points and miles can leverage partnership opportunities in a whole new way, not just for airlines but for other industries as well.  Partnership marketing should not only be about bonus miles and points, it should be about creating new touch points, adding tangible, unique benefits (hard and soft), and it should be about sharing insights.  Only with the latter will partnerships become more relevant.

There are limitless opportunities for innovation in partnership marketing...it only takes a willingness look for new partnership opportunities to compete, differentiate themselves, and succeed.

On the positive side, much of the downtown, uptown and French Quarter areas were doing better than in previous trips.  More stores and restaurants were open and there were some signs of life as it was (pre-Katrina).  The vibe from people on the street, particularly those for whom "hospitality" is their business, was more warm and welcoming than ever.  Couple this with an optimistic football outlook (at least for LSU, who for now is #1 in college football) and cooling temperatures and you have the right ingredients for a great year-end and outlook for 2008.

But something was and still is missing.  New Orleans needs more of a hook to get people to visit in the first place and to bring them back. 

The reason is simple:  The place is still suffering from the devastation of Katrina, rampant corruption and crime.  The question of investment, both from the private and public sectors, still hinges on the perceived viability of the area.  That aside, New Orleans still has all the ingredients to turn the corner and be a first-choice domestic (and international) cultural tourism destination.

Meanwhile, there will continue to be a lot of discussion in the coming months, especially in an election year, about how and what to invest in the re-building of NOLA.  There has been talk of making it another Las Vegas and there have been other (better) ideas about how to reposition the city.  At its core, its brand truth, New Orleans has a unique and globally attractive culture like no other.

In order to expand support beyond the locals and die-hard NOLA-lovers (whether from government, organizations, corporations or individuals), NOLA has to do more in terms of building direct relationships with people who visit and can credibly spread a positive, first-hand message about the place.  If there is going to be a sustainable and viable rebuilding effort, the post-Katrina perceptions and realities must be overcome and its image rebuilt. 

While the New Orleans Convention and Visitor's Bureau and others have been investing millions on advertising and PR (and doing some great work), making NOLA more appealing as a place to visit, meet and even live will require first hand advocacy and grass roots support.  This is the only way to make the positioning credible and not just a marketing promise.

So why not start with current visitors?  Like most destinations, and most companies for that matter, New Orleans and Louisiana spend nearly all of their budgets attracting new visitors rather than investing in the hundreds and thousands that arrive each day at Louis Armstrong International Airport.

There is no better way to build a database of prospective visitors, and advocates, than from those already visiting and on the ground there.  There are millions of dollars being spent through organizations like the CVB (New Orleans Convention and Visitor's Bureau), New Orleans Tourism Marketing, and the state department of Culture, Recreation and Tourism.  None of these dollars are being used to build a database and do relationship marketing.

Through a concerted effort by all of the tourism organizations, the private sector and other local organizations, New Orleans can build a sustainable dialogue with many more people by including a more significant focus on current visitors.  These visitors need to be identified, engaged and romanced by their trip so that they leave excited about returning and ready to spread that feeling.

Beyond and included in the visitors are the tens and hundreds of thousands of people like me who are expatriates, still possessing a love for the area.  What an opportunity to build a multi-faceted base of support for the city!  These people can be mobilized not only to visit but to advocate.  And over time, New Orleans can be rebuilt as it should be.

After the training program I was hired on by a suburban Macy's store to run a "better" sportswear business that included the Liz Claiborne department.  At the time Liz Claiborne was among the hottest up-and coming labels in women's wear. 

There are numerous lessons from working at Macy's that are still invaluable today.  Among the most relevant to loyalty and relationship marketing, however, came from running the Liz Claiborne business:  that customers can have intense relationships with brands.

The Liz lines -- Liz Claiborne, LizSport and LizWear -- were much more extensive and included specific named groups or collections within them, each designed to mix and match.  It was Garanimals meets high style, all at an accessible price point that allowed women with modest budgets to build a versatile wardrobe all within a single brand.

Each of the lines were clearly defined, from the collections to the hang tags, which were color-coded by size to make them easy (and quick) to shop.  The hang tags also usually had the name of the particular group on them.

The clothes attracted a loyal customer following.  These customers came into the store more frequently than most other customers, both looking for new collections and for new pieces to add to their existing wardrobe.  They made a beeline for the Liz floor and, while they shopped elsewhere, the majority of their time was spent looking through Liz merchandise.

This made the Liz business a lot of fun to manage, as these customers were very passionate about "Liz" and creating a lasting lesson in the power of brands - especially apparel ones.

Post script questions: 

Why are there not any apparel brands today as engaging as Liz was in this period?  It's not hard to imagine what Liz Claiborne could have done with the relationship marketing tools and capabilities that exist today...

Also, why don't any apparel lines use hang tags as devices to engage customers, get them to visit landing pages and identify themselves?  Apparel designers and manufacturers have the same challenges that so many other brands do in identifying their customers -- the hang tags should be as natural as a promotional offer on a cereal box.

Part of the reason for the busy-ness has been launching new programs.  Several of our clients have launched significant programs since our last post here.  In one case it's an evolution of an existing program and in the other it's a new program launching in test in a category that heretofore has not had any published programs.

Speaking of programs, what Nike+iPod are doing continues to impress me, largely because it's such a well integrated and well executed partnership.

Several noteworthy things have happened since approaching 100 miles.  First, when I hit 100 miles, I received a lovely banner upon connecting my iPod Nano and updating my runs. Note it not only offers to me a printable certificate but there's also a viral element - the opportunity to brag to my friends!

Shortly thereafter, no doubt due to inspiration from Nike and Apple (or is it Apple and Nike), I had a PR (personal record) run.  Apparently I ran my fastest 5 miles since getting the Nike+ setup and at the end of my run Lance Armstrong congratulated me!  Nice touch and very nice way for Nike to leverage its relationship with the greatest cyclist ever.

But wait, there's more.  Now I'm past200 miles, Nike is egging me on to hit 500.  Very smart and done in a very tasteful and, yes, motivational way, nicely reinforcing the training aspect of this offering.

Finally, Nike is working this offering through its indirect retail channel, as evidenced by this email I received from Atlanta's Big Peach Running Company:

It's worth repeating, this partnership and integrated marketing efforts is as good as it gets.