Voices: the CMB Blog

I started my career in sales.  In sales, you very quickly learn that it is much easier to sell to an existing - rather than a new - customer.  The fact that existing customers are valuable isn’t a tough concept to grasp. Customer loyalty researchers report that, on average, companies lose about 50% of their customers each year, that it costs 20x more to do business with a new than existing customer, and a minimal reduction in customer defection rates can significantly boost profits. 

So, can someone please explain why so many companies are making headlines for initiating new fees or penalties that seem designed to aggravate their customers?  I’m sure at least some of these stories caught your eye…

• In July, Netflix unbundled their DVD rental and streaming plan, effectively forcing customers to pay $6 more for the combo plan they had grown accustomed to. Then, in September, Netflix CEO announced that DVD rentals and streaming would become two totally separate services. The streaming service would retain the name "Netflix," while the DVD branch would be called "Qwikster." Reactions were predictably negative, and on October 10, before Qwikster had even launched, Netflix ended the failed experiment.

• Throughout the year, one after another of the major airlines (with the exception of Southwest and JetBlue) raised fees on checked baggage.  Fliers hate baggage fees and the long lines at airport security screening are made worse by passengers carrying on more bags.  The TSA estimates that the number of carry-on bags has increased by 87 million since 2009.

• On December 30th, after a customer ‘uproar,’ Verizon Wireless decided it will not institute a $2 convenience fee for online or telephone single payments, 24 hours after it was announced.

Even my favorite hotel company recently hit me with a $50 change fee for a mistake I made on the dates of a business trip.  I was coming to the hotel for goodness sake – just not on those dates!!! Ugh. 

I understand that companies need to make money; and changing regulations and technology can affect a corporation’s ability to deliver profit.  But in the spirit of the Occupy movement, someone needs to be watching out for the customer!

From a recent CMB Consumer Pulse – 44% of respondents report feelings of loyalty to 10 or more companies they do business with – another third to 5-9 companies.  In addition, we learned that two-thirds enjoy it when a company thanks them for their loyalty… and one-in three expects a company to thank them….boy they must be disappointed when instead of a thank you, they get hit with new fees and charges!

CMO.com recently listed the 10 things CEOs need from their CMOs  …drumroll please… #3 on the list is A Customer Whisperer…someone who can tell them what customers in the future, will want.  And #9 is A Customer Advocate… someone who can be the voice of the customer in the executive suite. Someone, who, in the face of pressure from finance or legal, will fight to ensure sufficient consideration is paid to the needs and interests of customers.  Marketers should seek to uphold our own version of the Hippocratic oath:  "first, do no harm to our customers."

So, what’s a brand manager or CMO to do? 

The problem probably isn’t that you don’t have enough data-the problem, instead, may be that you have too much information!  Or maybe the information isn’t being delivered to you in a way that makes it easy to find insights or support for your decisions.  If you work for a company like most, a significant portion of your research budget is dedicated to a customer feedback, performance, or satisfaction program. Are you getting the return (in insight) you are making for the investment you’re making?  Maybe it’s time to revitalize the program to enhance your role as customer whisperer and advocate! 

Here’s what we believe you should be getting from your program:   

• Direction for product/service investment decisions:  If you had $20 million to spend, where should you invest?  Where would you get the biggest bang for the buck?  Upgrading something customers see as a “table-stake”…. Or enhancing a service that is a “customer delighter?”  

• Identification of deal-breakers:  What interactions/events/problems cause customers to run away to your competitors? 

• Insight into the needs of key segments:  How loyal are key segments (Next Gen customers, Gen X/Gen Y, repeat customers) to you?  What percent of their wallet are you attracting? 

• Direction for operations improvements:  How well are you performing on the key drivers?  How does that compare to what guests get from competitors?  Which locations are excelling – and what is it that they are doing?  Which locations are lagging – and what can they do better?

• Brand-operation alignment: How well does the customer experience match what you promise?  (remember the ‘fly the friendly skies’ ad of a major carrier?)  What’s causing disconnects?  

• Competitive intelligence:  Who/Where are you leading?  Where are you lagging? 

• The voice of the customer:  Verbatim comments about what it’s like to buy from you. 

While an effective CSM program won’t answer all the questions the organization might throw your way, our clients find themselves better prepared to advocate for their customers, support investment decisions of brand or line managers, focus on areas of importance to key customers-to provide insight to reduce risk around your business decisions.  Customer performance measurement is a tool that you should have in your kit to help you engage and retain your customers.  Maybe it’s time to "sharpen the tool!"

For more on getting the most from customer feedback, download our Consumer Pulse on Customer Satisfaction Programs

Posted by Judy Melanson. Judy leads the Travel & Entertainment practice and loves collaborating with clients on driving customer loyalty.  She's the mom of two teens and the wife of an oyster farmer. Follow Judy on Twitter at @Judy_LC

On a recent 5-hour drive with my son Pete, his iPhone’s GPS-app suddenly started “cha-chinging” up points.  He didn’t know why the points were rolling in, nor did he have any idea how – or for what – or if he would ever redeem these points, but we both agreed:  “Points are good.”   

Nearly everyone, not just Pete and me, is hardwired to enjoy games.  "Gamification," the use of game mechanics in nongame settings, takes advantage of our psychological predisposition to enjoy games, and encourages people to engage in tasks that, but for the game, they might not feel compelled to do.  Traditional customer loyalty programs leverage game mechanics:  we earn points, achieve status/levels, display badges of honors and chase bonus points.  And, clearly, these mechanics help to increase consumers’ motivations and positively shape their behavior, leading to positive revenue impact for the associated brands.

Lately it seems that game concepts are cropping up in more – and some unexpected - places.  Part of the reason for the recent popularity is the growth in social media, a channel that was born to be gamified.  Twitter has been game-like from the beginning, with the main score being the number of followers.  Foursquare, with its hundreds of badges to win, is basically a game….it isn’t used, it’s played. 

But after reading about social loyalty programs, where members earn reward points for promoting brands on social networks, I’m wondering if marketers are taking things a bit too far.  Does rewarding customers for forwarding a brand-related tweet water down the strength of true loyalty?

If this term is new to you, let me tell you what I’ve been seeing:  Social loyalty programs are promoted as taking the concept of traditional loyalty programs to the next level by enabling companies to track and reward their fans, followers and customers for a wide variety of online and social activities -- from tweeting a message to checking in to a location or liking a post on Facebook.  Companies like CrowdTwist, a New York start-up (that recently received $6 million in venture funding) tracks and rewards customer behavior across social, mobile and online platforms. 

Maybe social loyalty programs are the future – but before building a social loyalty and/or changing your current loyalty program, I’d suggest you consider these questions: 

• Where’s the beef?  Traditional loyalty programs are built on the principle of rewarding customers for behavior of value.  The programs we work with can articulate the value of their members and of their program—the incremental sales, flights, stays, or bookings that they may not have generated otherwise.  What economic value will a social loyalty program provide to a brand?  What behaviors will you look to encourage?  Will a program encouraging social behaviors deliver desired outcomes?  The value of the activities must be calculated – in terms that the CFO will understand and believe. 

• What other (non-economic) value can a socially loyal member provide? What benefit to your brand is more fans or higher klout?  Can your increased social-WOM, be connected to increased sales?  Or insulate your brand from negative reviews?  The CFO might have a harder time articulating the value of these activities – but they’re important to consider.

• Finally, to whom would a social loyalty program appeal?  Segmentation research we ran a few years ago found that in a traditional loyalty program, the portion of members whose primary motivation was to “play the game” (e.g., seek out bonus points, enter contests) represented a fairly small portion of members.  But these Game Players – or Social Loyalty members - may be a desired demographic with untapped potential for your brand.

So, before spinning the dial, understand your different customer groups and their associated motivations. Explore, for which segments, a social loyalty program would be beneficial in shaping customer behavior to yield positive business results. As with all things “social,” gamification and social loyalty are tools in the toolbox to build customer engagement. Understanding if, when, where and how they fit into your current loyalty programs and strategies is the most exciting part.

Posted by Judy Melanson. Judy leads the Travel & Entertainment practice and loves collaborating with clients on driving customer loyalty.  She's the mom of two teens and the wife of an oyster farmer. Follow Judy on Twitter at @Judy_LC

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