Voices: the CMB Blog

Originally posted in Loyalty360

In early July, shoppers at Shaw’s, Albertsons, Acme, Jewel-Osco and Star were greeted at the door and asked to hand in their store loyalty cards. These chains, recently acquired by Cerberus Capital Management LP, all shut down their loyalty programs, focusing instead on everyday low prices and storewide sales.The move left some industry analysts scratching their heads, questioning why the brands would kill off decades old programs with millions of members. They pointed to the vast quantities of information that can be harnessed improve merchandising and marketing, and to customize products and messages. They hypothesized that the stores hadn’t invested in the data mining activities needed to extract insights. Perhaps…

Or perhaps the financial experts at Cerberus had done the calculation and determined that in today’s marketplace, the loyalty program – and its strategy and value– was standing in the way of profitable growth.

Think about it. What impact do the grocery store loyalty program cards you carry on your key chain have on your behavior?  Can you point to any benefit you’ve received beyond the ‘loyalty member price’ and coupons at check-out? Can you point to any special benefits you receive from your primary grocery store?  Or do you get the same level of benefits whether you spend $1 or $1000 per trip?

I think there are 3 compelling reasons these grocery stores don’t need a loyalty program to drive customer loyalty:

1. They need to compete with Wal-mart: These brands have to compete with Wal-mart and other warehouse stores offering EDLP (everyday low prices). To grocery and drug store shoppers, price matters!  And to sustain a business and drive profits at low prices, the brands need to focus on operational efficiency – not customer intimacy promised by a loyalty program.

2. They can take a local approach: The executives at these brands promise that analysis will be done at the store – not the customer – level.  Mining the data at the individual store level will, they theorize, provide plenty of data on what merchandise is important to shoppers and the impact of marketing decisions on spend. They also believe that taking a local approach – where store managers can make marketing and merchandising decisions – will enable stores to better meet customer needs.

3. They can focus on what matters to shoppers: Most customers are applauding the move to consistently lower priced products.  In addition, they suggest the brands focus on the basics – the features that drive their shopping decisions, including: (1) clean the store; (2) stock the shelves; (3) keep sufficient registers open to reduce check out time; (4) mark sale items clearly; (5) create a customer-focused culture.

In most locations, shoppers have many choices and in the absence of consistent delivery on these core elements, customers won’t shop at the stores, loyalty points or not.

“Sun setting” a loyalty program is not a low-risk decision. But program managers in every industry must be prepared to defend their programs by answering the following questions:How do you recognize and reward your most loyal and valuable customers?  How do you make participating in the program worth their while…and something they would miss if it were not present.

• If you ran a grocery store program, how would you treat the person who spent $1000 per trip? Would your first check-out register be for those with 10 or fewer items?  Wouldn’t you help the shopper get the items into their car?  Into the house?  Into the pantry? Do you really have to make them come to the store and shop? Do these customers get any special recognition in store?  Could they visit customer service to get a free cup of coffee or a piece of a new signature pastry when they enter the store?

What mechanisms are in place to grow the share of wallet from light shoppers?  What incentives and processes are in place to support your shopper’s goals and encourage them to spend a higher share of wallet with you?

• Could you look in my basket and make recommendations for recipes that my family might like?  Or like Amazon and Netflix, develop a recommendation engine (people who buy xyz also buy abc)?  Would you price match on identical items to prevent shoppers from fragmenting their baskets?

What has your organization learned from the data collected from the program?  Think about the tactical (e.g., merchandising, marketing) and strategic (e.g., location selection, branding, pricing) decisions supported and how you can get more value from the data you collect.

• Have you shared insights with store managers?  Your media partners/ad agency?  If not, schedule some meetings and connect data you have with what’s relevant to them. Today.

Consider what would happen if your loyalty program “went away?” Are you prepared to answer the question “Do you need a loyalty program to drive customer loyalty?” in a way that would satisfy your CFO?

• Get and communicate data on the value of your program, and how to drive additional value.  

It will be interesting to see the impact of Cerberus’ decision on the industry as a whole.  Will other grocers, to compete with Wal-mart, follow suit and disband their programs?  Or will we start to see some retailers ‘break away’ from the pack and to drive incremental behavior and true loyalty?

Where would you place your bet?

Judy is VP of CMB's Travel & Entertainment practice and loves collaborating with her clients. She's the mom of two college students and the wife of an oyster farmer. Follow Judy on Twitter at @Judy_LC

Headed to TMRE next month? Use our code CMB2013, and get 25% off of your registration.

It’s been accepted wisdom, for the past 10 years, that customer experiences should align with a company’s brand value proposition. Simply put, operations should focus on making sure the brand promises, implicitly (or explicitly) conveyed in market communication, are actually delivered.I recently stumbled across an entire industry that not only isn’t taking this view of brand-experience alignment, it doesn’t seem to realize that experience matters at all. It's not that they don’t care about their customers’ experience once they are customers (they care very much), but they seem completely blind to the importance of experience in the purchase process. Indeed the disregard for this type of experience is so commonplace that I didn’t notice it until I heard about a glaring exception.

I’m talking about higher education. This past spring, I toured many colleges in the Northeast with my 18 year-old son as he went through the selection and application process. Each of these colleges clearly spent a lot of money on sales and marketing. They all had very strong collateral, high quality mailings, hosted events designed to attract students, and I’m sure had a lot of other marketing activities as well. But when it came to delivering a pivotal experience—the guided campus tour, they all completely blundered.

The first tour at a highly regarded small liberal arts school in Maine was typical. It was conducted by an intelligent, friendly student. It would have been a great tour if my son had been primarily interested in how easy it is to make friends, how many good friends the guide has, how she found her art major and the greatness of the creative arts facilities. Of course she talked about other things, but these subjects were where her passion came through.

At another small college in upstate New York, the tour would have been great if my son loved playing Frisbee and wanted to know about all the wacky stuff the kids do to have a fun social life without a Greek system.

These tours weren’t bad, but they didn’t click with my son. He liked both colleges, but the tours did nothing to further his progress along the “journey” to becoming a student.

I didn’t think much of this until I had a conversation with a colleague whose daughter was also visiting colleges, and he told me about their visit to Elon University. He described how great the tour was. The student guide made everyone feel at ease, asked questions, and made sure the tour and conversations catered to everyone's interests and needs. She wasn’t salesy, she took a genuine interest in her charges and apparently tailored tour content on the fly.

My colleague mentioned that on the drive home (after seeing seven colleges) he asked his daughter which schools most interested her. Elon University was one of the three she mentioned. This surprised him because, while a very good school, it didn’t seem to be a particularly good fit academically or socially. His daughter soon came to the same conclusion and dismissed Elon from consideration. It struck him that the tour experience was central to creating such a strong impression. Imagine if Elon had offered a more fitting academic and social environment for my colleague’s daughter, it’s very likely that the tour would have sealed the deal.

So that brings me to my conclusion and recommendation. From my small convenience sample, it seems that most colleges and universities are ignorant of, or are just ignoring, the power of personal experience in the buying process. They spend a lot of time and money moving candidates through the purchase funnel, and then when they’re at the bottom and literally knocking on the door (to mix a metaphor); they fail to give that final little push.

I don’t know anything about how student tour guides are selected or trained. But surely it would be very easy to select the most outgoing, flexible, appealing work-study students, and then give them basic sales training on how to make people feel comfortable, ask the right questions and then tailor their approach to their customers’ needs and interests. Of course they wouldn’t call it sales training.  It could be a short seminar called “The Need for Understanding and Flexibility in Human interaction, 101.”

Rich is Senior VP and Chief Methodologist at CMB, he's the proud father of a brand new college freshman.

Join Tauck's Jeremy Palmer, CMB's Judy Melanson and South Street Strategy Group's Mark Carr on September 12th at noon (EDT) for a webinar: Focused Innovation: Creating New Value for a Legacy Brand

Goodbye, plastic hotel room key. So long, wallet. Farewell camera. These days you don’t need any of the above to unlock a hotel room, buy a mojito or snap a vacation photo.  All you need is, well — you. –Stephanie Rosenbloom, “Just Tap Here,” The New York Times

That quote, from an article in the NY Times’ Travel section, hit me like a wave. Since the beginning of the year, I’ve managed to lose a hotel key card, leave my cell phone at the office before going on a business trip (after carefully placing it where I would see it before dashing to the airport), lose my office and son’s daycare key cards, drop my American Express card somewhere during a 3-mile run, leave my reusable coffee cup next to the register at my local Trader Joe’s, and lose my sunglasses. It’s painfully obvious why this article, on the wonders of biometrics, hit so close to home.Biometrics have come a long way since the retinal scans featured in the old Bond and Batman movies. Now you can do more than imagine scanning your fingers to open the door, or make a purchase; hotels can use infrared signals as a virtual “Do not Enter” sign, detecting body heat and ensuring housekeeping staff doesn’t knock or barge in.

While I look at technology as enabling convenience, others just see more evidence of Big Brother penetrating our lives—all that data needs to live somewhere and that makes many people uneasy. Of course, you could make the argument that the NSA is already collecting vast amounts of data tracking our every move; we may as well use it to our advantage by gaining something out of this sharing.  As Zachary Karabell notes in a recent article in The Atlantic:

…for all of the legitimate concerns about government intrusions on personal privacy, Americans today -- along with many people worldwide -- surrender vast amounts of personal information to companies and seem quite prepared to surrender even more if it adds to the enjoyment and reduces the friction of myriad transactions that are part of everyday life.

With that quote in mind, I thought about how my clients can leverage this technology to deliver a better experience to their guests (while decreasing their operating costs, and gain repeat business and free marketing through advocacy).  Our work in the cruise industry, as well as the JD Power 2013 Cruise Line Satisfaction Report, reveals that the embarkation and debarkation process are very important in driving guest satisfaction. Think about how much more quickly those lines would move if an iris and/or fingerprint scan were all it took to board the ship?  Guests get where they want to be more quickly and cruise lines need fewer embark and debark crew members to manage the process.

Onboard photography is another area that frustrates guests (and represents lost revenue) when they don’t have an adequate number of photos from which to choose. Facial recognition technology that enables onboard photographers to group every candid picture they take, so passengers can easily browse, would solve that problem.

For cruises attracting a mix of guests from all over the world, using fingertips as a purchase trigger rather than cash or credit cards would also help improve the onboard shopping experience for those guests who do not hold currency in the denomination used on the ship and/or who are not fluent in the primary language spoken onboard.

New tools and emerging technologies offer myriad opportunities to improve the customer experience. Biometrics and mobile tracking are giving brick and mortar businesses the opportunity to catch up with their online counterparts. But there’s a real trade-off here—if customers are going to take that leap of faith it needs to be worth it. What do you think?

Lynne is Research Director of CMB’s Retail and Travel practice; she has not lost one personal object since June. She would like to thank the The London Hotel NYC for getting her back in her room quickly (after verifying her identity), Judy Melanson for letting her use her phone to stay in touch with her family while traveling and Sean Kearney for dropping off her phone at home so it would be there when she returned, AmEx for getting sending a replacement card within 24 hours and Trader Joe’s for maintaining a Lost & Found. 

Learn how we help Royal Caribbean measure guest experience and improve customer satisfaction and retention.

What do Crayola, Amazon, Cheerios, Apple, and Subway have in common?

Over the years they’ve each been named one of America’s most loved brands. Of course there are lots of strong brands (nearly as many as there are “most loved brands” lists) but what is it that makes those brands so strong? No one will deny the importance of the brand name, positioning, or communications, but what these beloved brands have in common is how they deliver their brand experience.When M3 Insurance, Wisconsin’s largest privately held provider of commercial insurance, decided they wanted to strengthen their brand position, they had a few options. One common approach is to invest time and money into a brand’s value proposition and the brand promises they’re making to their customers. A company that takes this approach will spend a lot of time building enthusiasm and energy around a brand position, both internally and externally.  They might have banners, posters, and many companywide meetings to communicate the brand to employees.

There’s a lot of good stuff in this traditional approach, but our experience tells us that it rarely, if ever, goes far enough. Brands that stand out are able to find ways that empower their employees to make decisions that support the brand.  They’re able to articulate how employees can/should act to deliver on the brand promises and benefits—they use each interaction with their customers as a chance to deliver brand value—something even the best company-wide meetings can’t inspire alone.

With M3, our approach was both practical and comprehensive. At center, was the need to ensure customers’ experience aligned with M3’s brand promise. Guided by that core principle we developed a plan to determine how (customer facing) employees should behave to deliver the brand promise. Want to learn how we did it? Join M3’s Traci Mandell and me this Thursday to learn a new approach to developing and measuring truly brand-building customer experiences.

Click here to register.

Posted by Amy Modini. Amy is Account Director for CMB’s Healthcare and Insurance Practice, when she gets the time she loves going to the beach with her two kids.

Healthcare in the US has been a hot media topic, and the Affordable Care Act’s next key provision that goes into effect on October 1 will bring about profound change in the health insurance industry. Consumers looking to buy individual health insurance will be able to enroll in subsidized plans offered through state-based exchanges with coverage beginning in January 2014.Regardless of the politics and adoption hurdles surrounding the subject, it’s crystal clear that health insurers will need to change the way they approach the market in the coming years. Challenging as it may be, this change represents opportunity as well. Not only will this regulation open up channels to sell direct to new customer segments that have previously been underserved or never served, but the shift to a more retail-oriented business model will push customer-centricity to the forefront of health insurers’ strategy.

So, what does customer centricity actually mean for insurers? It’s not something I have hard and fast answers to yet, but we’re collaborating with our clients to help define a path forward. Here are my top-level thoughts on some of the myths that need to be put to rest in order to build a successful customer strategy in the space:

MYTH: The consumer matters more than the ecosystem.
FACT: Up to now, consumers have generally been “extended stakeholders” in the health insurance ecosystem, and they are definitely an audience that insurers should be learning about and listening to more given the change on the horizon. However, serving the consumer well means also understanding how other players—employers, brokers and providers—are preparing for change. Be careful not to develop blind spots toward traditional stakeholders.

MYTH: If you build technology, the customers will come.
FACT: No doubt today’s consumers are open to social tools, apps and other tech solutions that will help them learn about and interact with companies. But in order for a new technology to really matter to consumers, it has to solve a pain point.  Without a deep understanding of what customers need, and a willingness to address root-level issues (such as consumer trust), a new technology is just a shiny object.

MYTH: You’ve got the right data…and it’s Big.
FACT: Insurers have a lot of data. But it’s primarily based on claims and transactional data, with very little gleaned directly from healthcare consumers themselves about wants, needs, and interaction pain points. The industry’s legacy of being claim-oriented continues to drive consumer dissatisfaction and distrust, so it’s not the ideal source for data that will build customer intimacy.

What other myths need to be busted in order for insurers to be truly customer centric? We’d love to hear from you and promise to share our thinking as it evolves.

Jennifer is a Director at  South Street Strategy Group. She recently received the 2013 “Member of the Year” award by the Association for Strategic Planning (ASP), the preeminent professional association for those engaged in strategic thinking, planning and action.

South Street Strategy Group, an independent sister company of Chadwick Martin Bailey, integrates the best of strategy consulting and marketing science to develop better growth and value delivery strategies.