Voices: the CMB Blog

This summer, a Harvard Business Review case study presented the dilemma of a modern dance  company caught between their mission to grow and enter new markets, and their mandate to remain creative and groundbreaking. The arguments on both sides are pretty compelling.  A new employee pleads her case that the dance company needs to know who their customers are and what they want, while the Company’s founder argues this information would be detrimental to creating challenging dance performances— “if we ask them what they want, we’ll end up doing Swan Lake every time.”Conversations like these aren’t just happening in the halls of fictional dance companies, they’ve been challenging companies for at least a century. Take this quote from Steve Jobs, founder of what is arguably the most consistently innovative company today:

We figure out what we want.  And I think we’re pretty good at having the right discipline to think through whether a lot of other people are going to want it too.  That’s what we get paid to do. So you can’t go out and ask people, you know, what’s the next big [thing]?  There’s a great quote by Henry Ford, right? He said, ‘If I’d have asked my customers what they wanted, they would have told me ‘A faster horse.’ [2008 Interview with Fortune magazine]

In the past several years, I’ve sat in on talks, read articles, and spoken to lots of product developers who now feel that research and talking with customers provides little, if any, value.  They invariably point to Apple or that ubiquitous Ford-ism, but it seems to me that those who are dead set against customer research are missing the point.  It’s not the customers’ job to develop the solution, it’s simply the customers’ job to tell you about their experiences and what they’re trying to accomplish.  In the famous quote by Henry Ford, the takeaway isn’t that they should develop a faster horse.  Instead, it’s that people want to travel faster, and Ford came up with a better solution.

Let’s look at Apple, for example, if you take the latest version of the iPad, you’ll see they haven’t ignored customers at all.  People are more connected today than at any other point in history; our desire to connect with people and share, access, purchase, and manage media/content from anywhere at any time has only grown stronger with time.  Recognizing these trends, Apple made an incremental shift in current tablet technology and created a game-changing product.  The iPad might not be the perfect device for every user, but it performs great on attributes that allow us to connect with one another and consume content. 

What makes Apple special is their ability to anticipate needs becoming more important and that's what they did in the case of the iPad. But they don't just understand the customer needs from a macro level, they have a complete and nuanced understanding of the detailed needs that make up the entire customer experience.  So when it came time to build the next generation of tablets, they made the right decisions about screen size, processing speed, connectivity options, virtual keyboard size, touch screen sensitivity, gestures, etc., because they knew what mattered to customers.  The customers’ experience was the driving force behind those decisions.  This vision allows Apple to consistently churn out game-changers.

But donning a black turtleneck and taking the buttons off of your products won’t get you the next iPad.  While Apple may not engage in typical customer experience research, they have a culture that is customer focused from top to bottom. Their product development process is motivated, from concept to implementation, by the goal of providing seamless, user experience. Apple’s greatest innovations—the iPod, iPhone, and iPad—embrace simplicity and usability. Uncovering customer needs and creating products and services to meet them doesn’t require one of the greatest visionaries of all time, it can come through comprehensive customer experience research.

So we’re back to our dance company. How can they maintain their desire to grow with their commitment to boundary breaking dance?  The answer is customer research that identifies all of the customer wants and needs for a given product/service, and then tells you which ones matter the most.  Show goers may say they want to see Swan Lake, but do they really mean they want to recreate a powerful experience they had the first time they saw dance? Customer research that focuses on needs is a powerful tool, and critical to innovation whether developing a dance program or building a new processor. By knowing what matters to customers, organizations can discover unmet needs, find opportunities for disruptive innovation, know where to focus resources, and set the foundation for developing game-changing products and services

Needs based customer research is not about asking the customer to dream up the next new product, feature, or technology.  Nor is it about learning new ways to sell customers products they don’t really want.  It’s a proven method to help organizations connect with their customers and focus on what matters to them.  Apple’s success is based on a fundamental and detailed understanding of their customers.  Do you understand your customers in that way—or are you giving them Swan Lake?

Posted by Andrew Wilson, Andrew is an Account Director at CMB, he isn't sure about modern dance but awaits the iPad Mini with baited breath.

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A version of this post was published in Loyalty 360's Loyalty Management Magazine

My colleagues can tell you that although we're well into fall in New England, I still love the garden as loyalty program metaphor. That's because loyalty programs, like gardens, are living entities that require ongoing monitoring and periodic refinements to ensure they grow stronger, continue to operate at peak performance, and deliver the results you need for your business. Here are the four steps to getting your program ready to support growth:Step 1:  Review your goals and the (competitive) landscape

Before you tackle the issue of “what” and “how much” to offer to members to incent their behavior, take time to review:

Desired behaviors:  Are you trying to encourage members to visit more frequently?  Spend a bit more?  Advocate to friends and family?
Customer’s needs:  What goals are your members trying to realize?  What activities are they passionate about?
Brand alignment:  How well does your program reflect the unique selling point or values of your brands? Where are the misalignments? 
Program goals:  What key metrics do you measure to report on program success: member acquisition or retention, e.g. the percent of customers who redeem?
Competitive activity:  What outcomes are these programs focused on?  How differentiated is your program from theirs? 

Determining which, and how many, rewards to give your customers, requires careful consideration of multiple factors. Before you proceed down a “program optimization” path—test the soil.  It’s impossible to build a successful garden if you’ve chosen the wrong plants or haven’t added the nutrients your soil needs to support them.    

Step 2:  Focus

“If you persist in trying to be all things to all people, you will fail. The alternative, then, is to be something important to a few people.” – Seth Godin, in We Are All Weird

The focus of your program may be on high-value members and that’s okay.  Today’s high value customers are fairly easy to identify; they’re the ones who buy higher margin products, visit often, and spend in multiple departments and categories.  But concentrating solely on these customers means that you may be missing an opportunity to lay the foundation for future success.  Consider identifying customers who have high value potential (via predictive modeling) and nurture those relationships as well.  In addition, you may find, upon reviewing your goals and objectives, there are certain other segments of customers that matter as well – and for whom you need to focus activities and attention.  For example:

• Caesars Entertainment’s re-launched its Total Rewards program to celebrate its position as the country’s leading entertainment loyalty program.  The new program offers additional offerings and experiences designed to appeal to Entertainment Seekers (in addition to the core avid gamer); their relaunch included concerts by Cee Lo Green, Mariah Carey, P.Diddy and Gavin DeGraw. 

• Best Buy gave select members of its Reward Zone loyalty program a ‘surprise and delight’ reward, a ticket to the Twilight premier.  Sales remain the driving force behind their points-based loyalty system, but in surprise-and-delight programs, marketers can choose consumers who might be major spenders but also because they're passionate or the kind of people who drive incremental buzz online. They’re using this approach to build greater engagement among high-value customers and create more PR-worthy and effective programs in a crowded loyalty space.

Bottomline: focus on the people that are aligned with what you are trying to do. 

Step 3:  Differentiate and innovate

Colloquy’s report on the state of the loyalty industry finds the average US household has 18 loyalty program memberships.  Eighteen! 

If your program is purely a frequency-based program, differentiation isn’t your goal.  However, dialing up program innovation to differentiate from competitors may prove valuable if your desire is to create loyalty, drive incremental spending, stronger customer engagement, and additional brand advocacy.

I love home-grown vegetables, and the varieties I pick are those that do well in my garden and that I can’t buy in a store.  Although I love to garden – if the only product I could grow was one that I could easily buy, I may reconsider the time I was willing to invest.  My pride in this activity would decrease and I’d tell fewer people about my garden. 

For the members you’ve decided to focus on, differentiate your program from competitors.  Give your members a reason to return— pride in their association with you and something to talk about!

Step 4:  Optimize program benefits

You’ve reviewed your objectives and the competitive landscape.  You’ve targeted specific members and have embarked on a program to identify innovative ways to differentiate yourself in the marketplace.  What now? 

To justify changes in your program, you’ll need to articulate the incremental value additional benefits will deliver.  You’ll need to do that if the additional benefits require additional investment – or if you are working with franchisors who demand financial justification to justify additional investment! 

Over the last ten years, we’ve worked with industry leading programs to analyze the cost-benefit of program benefits to support program development or refinement.  Here are a few examples where we conducted quantitative research using advanced analytics (like Discrete Choice):

• A leading upscale hotel chain, needed to figure out an on-property benefit it could provide in place of a guaranteed suite upgrade since some the upgrade wasn’t a viable option at some of their hotels.  An alternative was identified and members are given the choice at check-in. 

• As it develops and acquires new brands, this hotel loyalty program needed to identify the right type and level of benefits to offer at to guests at its extended stay hotels – benefits that would be of value to guests who stay, on average, for two weeks at the hotel

• A leading luxury retailer wanted to optimize structure to drive incremental sales and refresh benefits to incorporate more brand-relevant experiential elements for the refresh of its flagship shopper loyalty program

Discrete choice is a great tool for loyalty program optimization because it allows us to:

1. Optimize programs based on client’s goals:  By examining member interest in thousands of alternative benefit packages – and calculating the cost of providing those benefits – we can identify the best programs in terms of profit (‘high customer value’ and ‘low cost’), or for other key outcomes like member acquisition, increasing take rate from competitor’s customers, etc.

2. Estimate shifts in market share that could result from changes to your program benefits

3. Examine incremental spend - attributable to program benefits - from a couple of different angles

If you’re looking to optimize your loyalty program resources to get as much benefit as possible, following this four step plan may cause you to think differently about your program, the benefits it offers and the potential that exists.  Focus on what, and who, is most important and pruning back where you may be over-delivering can help ensure that your program grows stronger, operating at peak performance, and delivering the results you need for your business. 

Judy Melanson 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

You have a loyalty program, you offer discounts, special rewards, and you track your growth.

Well so does everyone else.

Judy Melanson shares tips for optimizing your loyalty program so you can break away from the pack, and make the most of your loyalty investment.

Read more about our work with loyalty programs here.

On a recent trip to Washington DC, I had a two hour delay on the flight out, and a broken Direct TV on the flight back, and yet when I got home I was delighted with my airline. I know this sounds unlikely, but as a result of the delay and the broken TV I racked up $75 in credits towards my next flight with JetBlue. Imagine that in the era of bag fees and paying for snacks!

Why is JetBlue, unlike many of its competitors, so willing to fork over credits for annoying, but still manageable service interruptions? To find out, I did what any curious market researcher without access to a ton of data would do, I Googled. Jet Blue’s Customer Bill of Rights was born after a series of storms in February of 2007. Thousands of vey unhappy customers were stranded on the East Coast for days.

Winter storms are typical and plague airlines around the globe, but JetBlue got itself into icy waters because they failed to react appropriately. Hesitant to cancel flights and tarnish their industry leading record for the fewest cancellations, executives waited too long to take action. By the time they did, passengers had been stranded on planes and at gates for upwards of 10 hours. Aircraft were literally frozen to the ground, customers were unable to rebook flights because gate agents were overloaded and the website did not allow for re-bookings. And compounding the problem, JetBlue did not have robust enough information systems to record and track the many bags lost in the chaos.

According to Texas A&M marketing professor Leonard Berry, JetBlue violated two core customer service codes during this storm – it did not provide customers with reliable service nor did it seem to resolve problems fairly. Clearly JetBlue had some work to do to regain the trust of its customers, and its Customer Bill of Rights was implemented shortly after the storms of 2007. JetBlue now offers vouchers or refunds for many frequently occurring flight snafus, including a free flight for a plane unable to reach a gate within two hours of landing, or $50 for two to three hour delays.

As a delighted customer, despite the inconveniences, I thought this was a great example of a company putting its money where its problems are. It should be a model for other companies as they try to provide customers with the highest level of service despite circumstances that are sometimes out of their control.

For more on Customer Experience and Loyalty, you might like: Do you care about your customers? Really care?

Amy Leathe is a Project Manager in CMB's Financial Services practice. She wrote this entry during a ground halt of an already serious delayed Virgin America flight. Here’s hoping they follow JetBlue’s lead!

Chadwick Martin Bailey's Andrew Wilson talks about the role of customer experience in helping organizations innovate, and why getting and understanding the answers to what your customers want and need is critical for successful innovation.

Andrew Wilson is an Account Director at CMB. He's a skier and long-distance runner, he also has a delightful 3 year old lab who deserves his own video.