_ 28.October 2013

PAGE 05HOW BIG DATAIS CHANGINGMARKETING

PAGE 12CUSTOMEREXPERIENCEIS THE KEY

PAGE 14COMPANIESARE COMINGTOGETHER

customer LoyaLty

03

customer loyalty

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Ȗ The modern marketplace is not for the faint-hearted. At every turn there are competitors vying to steal your customers, while con-sumers themselves become ever-more savvy, checking out products in store while comparing prices on smartphones or bypassing the high street entirely to go online.

This state of affairs underlines the importance of customer loyalty for any type of business in the 21st century. No longer can an enter-prise expect consumers to keep coming back simply because they once chose it to make a purchase.

Another illustration of just how crucial customer loyalty is comes when you consider that it is thought to be roughly ten times cheaper to retain an existing cus-tomer than acquire a new one. That means any business failing to retain customers faces an uphill battle for profitability.

However, there is considerable evidence that many companies do not fully understand just what customer loyalty is. According to Thomas Brown, associate director of research and insights at The Chartered Institute of Market-ing, the concept of loyalty has changed considerably over the past decade and is now far less about a

promotional-led approach. He says it should be thought of in terms of getting closer to customers to gain a deeper understanding of who they are and what they want.

To that end, the “customer experience” has replaced more tra-ditional customer service depart-ments in many companies. Mr Brown explains: “Having absolute clarity of responsibilities within the business is key, but I don’t think it’s a case of determining where things sit. I think success-ful organisations recognise that collaboration across different parts of the enterprise is far more important than delineating who has responsibility for elements of the customer journey.”

In his view customer retention and loyalty require lining up all the moving parts in a business – or “the ducks in a row”, as he puts it – so that every member of staff understands the role they play.

BMW is one example of a com-pany that understands the cus-tomer loyalty concept. Mr Brown says that although some 12,000 people work for the German car maker in Britain, only 900 to 1,000 are BMW staff. The com-pany has a “brand academy” near Reading where dealership staff

and others are trained to explain the role they play in delivering BMW’s “brand promise”.

Many companies still misun-derstand the complexities of cus-tomer loyalty, which means that it becomes the responsibility of the customer loyalty manager – typi-cally a mid-level role – says Vince Mitchell, professor of consumer marketing at City University in London. That results in confu-sion about the purpose of typical loyalty schemes such as Nectar or Tesco Clubcard.

“They think that loyalty is about rewarding purchases and thus you can increase it by encouraging customers to buy more – that’s a fundamental misunderstanding of what creates loyalty. It might not be giving people 1 per cent back – it very rarely is,” he says. Far more important, Professor Mitchell argues, are factors such as product quality, convenience, identity and

what they say about the consumer. Some companies have realised

from the outset how to keep customers coming back time and again, he says, with the Body Shop as just one example: “Understand-ing your loyalty drivers right from the very beginning can result in massive growth very quickly.”

Conflicts can arise when finance directors, faced with the pros-pect of falling profitability, might decide to reduce spending on the factors that can drive loy-alty, which he believes ultimately weakens sales.

Key to customer loyalty is accu-rate, informative data, Mr Brown

adds. “There are some relatively straightforward ways of doing this, but it requires time and analysis, and there is a cost. For some busi-nesses, that can be a challenge.” The good news is that the advent of cloud computing and software-as-a-service is making such num-ber-crunching much more afford-able, putting it within the reach of even small and medium-sized businesses.

Digital in general is having a pro-found impact on the field of cus-tomer loyalty, Mr Brown says. Con-sumers know they now have more choice and therefore have become slightly less loyal in general. As well as being more price sensi-tive, they are taking into account reviews and recommendations of other buyers, which are trusted far more than advertising. “Smarter organisations have recognised this trend and embraced it because it’s not going away,” he says.

Professor Mitchell also high-lights loyalty scheme fatigue among consumers now that almost every retailer, bank and mobile phone operator has some sort of incentive plan. Even John Lewis department stores and Waitrose have succumbed to the lure of the loyalty card. “You start thinking about the value of your data much more because you realise that all companies want it – therefore it must have more value,” he says. “And you do begin to expect more and it’s right that you should because it’s largely for the benefit of the company than the consumer.”

Senior executives must realise that customer loyalty is too important to be left to middle management, writes Chris Johnston overview

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STAYING LOYAL TO THE CUSTOMER EXPERIENCE

Collaboration across different parts of the enterprise is far more important than delineating who has responsibility for elements of the customer journey

DistributeD in

Publishing Manager Alice Thwaite

DesignThe Surgery

Managing eDitorPeter Archer

JaMes DeanProfessional services correspondent at The Times, he was the newspaper’s online opinion editor and online law editor.

niC FilDesTechnology and communications editor at The Times, he was formerly with The Independent and Dow Jones Newswires.

Joshi herrMannFeature writer and interviewer at the London Evening Standard, he was shortlisted for Young Journalist of the Year at the 2013 Press Awards.

KathrYn hoPKinsEconomics correspondent at The Times, she was a spokeswoman at HM Treasury and an economics reporter with The Guardian.

Chris JohnstonOnline business news editor at The Times, he is responsible for digital platforms, including the newspaper’s website.

leo KingFreelance journalist, he was news editor at Computerworld UK and deputy editor at IT Europa, and now contributes regularly to the Financial Times and Forbes.

anna leaChFreelance technology reporter and producer at Channel 4 News, she was on the staff of The Wall Street Journal and The Register.

MarCus lerouXIndustrial correspondent at The Times, he was previously the newspaper’s retail correspondent.

ProDuCtion ManagerNatalia Rosek

Share and discuss online at raconteur.net

CoMMissioning eDitorKathyn Hopkins

Contributors

05

customer loyalty

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big data is turning marketing inside out and smart companies are making sure their marketing campaigns are founded on figures

CoMarCh

Ȗ Almost all businesses have customers. And those that care about growth want to know a lot more about the people giving them money than just their pay-ment details.

“The goal of any business is to create and maintain their cus-tomer,” says Frank Buytendijk, a vice-president at the research firm Gartner, echoing management guru Peter Drucker.

It used to be store cards that gave companies customer data – addresses, past purchases. One problem was that you only knew it after the customer had already decided to buy something. Tech-nology has changed all that. Now companies can have much more data on their customers and they can have it in real time. They can even have it before a purchase too.

Tom Szekeres, of This Here, a new data-focused London market-ing agency, explains the potential of analytics for finding new cus-tomers. “When you’re looking to expand, it helps to think, who do we want to go after, what are they interested in? Data can tell you where there’s an opportunity,” he says.

That’s why big data is turning marketing inside out and why smart companies are making sure their marketing campaigns are founded on figures.

The internet has changed a lot of things and one is that almost everything people do online – from clicking on a link in an e-mail, to tweeting, to browsing jumpers–

but it also helps our brands and sponsors market to them too.”

Ms Kriss made sure to hire in data talent when she built the mar-keting team from scratch earlier this year, ditching brand managers for a head of customer relationship management and digital.

“Marketers are losing their seat at the table because they’re not putting the science into what they do. There’s no rigour,” she says.

An example that inspires This Here’s Mr Szekeres and business partner Jemima Garthwaite is one of the communication success sto-ries of the past decade: the Obama US presidential campaigns, which took a data-oriented approach to the traditional business of voter persuasion.

“You had a political class who did their homework and used tools like polling,” says Mr Szekeres. “But a lot of it was about hunches – you hoped your message resonated. However, on both Obama cam-paigns, they did an amazing job at speaking to very small sections of potential voters and working out what would appeal to them.

“They had myriad databases, with data about every potential voter, and an HQ that combined all this and hired data scientists to

run what was essentially a massive marketing campaign.”

So if we agree customer data is important, how do you do it?

You may need to bring new skills into the business, as AEG and Obama’s campaign did, but you also need to train up existing staff and that should go all the way up to the top.

“Chief executives should lead by example,” says Gartner’s Mr Buytendijk. “They should want to know what their customers are saying.”

And bringing customer data analysis in-house is something most companies want to do – 64 per cent, according to a Gartner survey.

There are a lot of different ways to convert customer data into marketing campaigns, but at its simplest there is a database, where the information is stored, and a dashboard, where you can access the information and slice it in dif-ferent ways. Then that needs to be understood and put into practice.

The infrastructure has become more complicated as data now streams in from different sources.

“There are so many types of data you can collect – mobile, social,” says Mr Buytendijk. “You need to have a portfolio of databases and special tools, as well as the people who can operate the stuff.”

But when those different types of data do correlate, that’s when some of the most interesting insights crop up and it can go well beyond tweaking an ad campaign. Ms Garthwaite, of This Here, con-cludes: “You might actually realise you can create a product that didn’t exist before, purely because you’re aware that there’s audience for it.”

Source: Gartner Source: McKinsey

25%of companies who use customer data in big analytics projects run a reputation risk that customers will think they have gone too far

in how they use the analytics

20%rise in marketing return on

investment by companies that put data at the centre of marketing and

sales decisions

HOW BIG DATA IS  CHANGING MARKETING

Within six months of being awarded the Heathrow contract, Comarch has delivered an on-target programme launch and a range of new innovations

High-flyers in loyalty management

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Comarch and Heathrow

Covering five square miles and pro-cessing nearly 200,000 passengers each day – more than 70 million a year – Heathrow is one of the world’s most popular airports. Serving over 180 destinations, it plays host to more than 80 airlines, providing a global hub for its many passengers.

In June, Heathrow was named Best Airport in the 2013 ACI (Airports Council International) Europe Awards. This builds on the 2013 SkyTrax World Airport Awards when Terminal 5 was named the world’s best airport ter-minal for the second consecutive year and Heathrow was recognised for best airport shopping worldwide for the fourth consecutive year.

With more than 200 different out-lets, Heathrow is home to some of the world’s most successful retail space

Founded in Cracow, Poland, Comarch is celebrating its 20th anniversary as an international provider of IT solu-tions, boasting 40 subsidiaries in 25 countries – and does not intend to stop there.

Almost 50 per cent of its revenue is generated worldwide and a diversi-fied portfolio of foreign investment attests to the quality of the compa-ny’s software development.

Among Comarch’s many lead-ing, original solutions is its system for managing loyalty and market-ing platforms.

Among the clients who use Comarch loyalty solutions are Jet-Blue Airways in the United States, Enterprise Holdings, one of the world’s largest car rental companies, Rogers Communications in Canada, Russia’s S7 Airlines, the Brazilian airline Azul, and foremost among UK clients are BP and Heathrow.

Comarch employs nearly 4,000 specialists and can boast more than 3,000 projects carried out success-fully on five continents in 40 countries over the last two decades.

The opening of a London office in Paddington last year is the result of a long-term strategy of gaining a client base in Western Europe and over-seas, and proves that Comarch loyalty management systems are recognised around the world. The main sectors of UK interest are financial services, telecommunications, travel and retail.

with annual net sales of over £1.7 bil-lion, income which subsidises the landing fees charged to airlines.

Fundamental to this retail offering is the loyalty programme for Heath-row’s frequent travellers. Originally launched in 1999 as WorldPoints, the programme was rebranded in May as Heathrow Rewards in parallel with the transfer of programme manage-ment to Comarch and the Comarch Loyalty Management Platform.

Responding to member feedback and employing the functionality of the new platform, the customer proposition was also enhanced at this time to offer greater appeal to the modern, digital traveller.

Heathrow Rewards

A loyalty programme that rewards members for everything they do at the airport, Heathrow Rewards has more than 400,000 members. Growing rap-idly, it continues to evolve to improve members’ airport experience by rec-ognising the key role retail plays in overall customer satisfaction.

Members collect points through transactions at any of the airport’s retail outlets, bars, restaurants, bureaux de change and official car parks or by pre-booking tickets for Heathrow Express trains.

These points can be enjoyed as shopping vouchers, redeemable across the airport, or as parking and

rail discounts. Members can also elect to use points to boost their bal-ances within other frequent-flyer pro-grammes, including British Airways Executive Club, Virgin Atlantic Flying Club and Lufthansa Miles & More. Members enjoy twice the amount of free Heathrow wi-fi as non-mem-bers, and benefit from exclusive offers and promotions from retail brands located within the airport.

As part of the loyalty partner ten-dering process, Heathrow expressed a desire for greater agility in responding to members’ needs and advances in digital technologies, in addition to a seamless transition to any new platform.

Within six months of being awarded the Heathrow contract, Comarch has delivered an on-target programme launch and a range of new innova-tions, including virtual membership cards, a mobile-enabled member portal, electronic redemption of rewards within retail outlets and the real-time validation of loyalty credentials within the Heathrow wi-fi service. Future developments include the integration of loyalty

Comarch, global provider of loyalty management systems, is collaborating with London Heathrow Airport to make every journey better

segment information within other Heathrow transactional websites.

In addition to the loyalty manage-ment platform, Comarch supports Heathrow in programme manage-ment, offering services such as data analysis, key performance indicator reporting, contact centre services, member website services and new partner integration, including points accrual hardware.

The collaborative nature of the Heathrow and Comarch relation-ship is already delivering benefits in terms of member numbers and desired behaviour, and both parties are now engaged in long-term plan-ning for continuous improvement, delivering upon the promise of “Mak-ing every journey better”.

For more details and to join Heathrow Rewards, please visit www.heathrow.com/rewards

employees4,000

Most of our revenue is generated worldwide with a diversified portfolio of foreign investment

Public company traded on Warsaw Stock Exchange

years’ experience in the market20 loyalty projects50

Our company goal is to deliver state-of-the-art customer relationship management and loyalty technology

OUR REACH IS UNRIVALLED: PROJECTS IN LOYALTY AND MARKETING A CUT ABOVE THE REST

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Customer loyalty by numbers

Page 08

Vast amounts of digital data being collected on consumer behaviour is transforming the way businesses operate,as Anna Leach reports

MANAGiNG DATA

can be recorded. There’s no record of how long someone spends looking at the jumper section in a bricks-and-mortar shop, but there is in the online store. That’s the new customer data and there is a lot of it. It no longer stops after the customer has paid for the product.

“We have shifted from static profiles – names, personal pur-chase history – to a different type, a behavioural profile,” says Mr Buytendijk.

“If I buy a book from Amazon and I blog about it or put it in my stack at Goodreads [social book website] then Amazon can see not

only that I bought a certain book, but also what I think about it, when I read it and ultimately how I felt about it when I’m reviewing it. Not everyone will do that, but you can create a profile of how the product is being consumed.”

It’s a no-brainer for internet companies to crunch customer data. But even more traditional companies are doing it too. Take AEG, a global sports and entertain-ment company that runs brands from the LA Galaxy football team to London’s O2 Arena. The com-pany’s chief marketer Kimberley Kriss told a marketing maga-zine how she is building a global database so AEG can develop a deeper understanding of the peo-ple attending its events.

“We’re going to understand who our visitors are, and what their needs and preferences are,” she says. “Not only does that help us when we’re marketing a live event,

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customer loyaltycustomer loyalty

06 0707

Ȗ The arena has never been as competitive for companies bat-tling to earn a share of consumers’ dwindling spending cash. As if that was not enough to contend with, the most prolonged squeeze on dis-posable incomes has taken place against an equally profound shift in how customers are shopping.

The mobile phone has arrived as a powerful weapon in the modern

consumer’s armoury, enabling them to buy, check prices and research products on the go. Meanwhile, retailers and other customer-facing companies are looking towards mobile and con-tactless payments to make transac-tions as seamless as possible, and to garner more data on customers’ shopping habits.

Loyalty schemes have been duly drafted in at the front line of how many retailers react to this new, price-sensitive environment.

Since the recession took hold, all the major supermarkets have introduced price promises of varying forms, some of them using technologies that would have been inconceivable a few years ago.

Asda’s price guarantee works by customers typing in a code on their receipt on a website which checks their basket of goods against an

independent database, calculating whether it would have been more than 10 per cent cheaper. If not, the scheme gives shoppers a refund.

Sainsbury’s, unlike Asda, runs a loyalty programme as part of the Nectar scheme. It has also intro-duced a more immediate system that gives customers a coupon at the till if the basket of goods they bought would have been cheaper elsewhere.

Loyalty schemes are develop-ing into one of the chief ways of combating “showrooming”, the phenomenon of customers using stores as mere showrooms where they browse and use their mobile phones to find better offers.

In the United States, Walmart’s phone app has an “in-store mode” that gives customers access to that store’s offers. It has found that 12 per cent of purchases on the mobile app are made when cus-tomers are in a store.

For Walmart, and its British subsidiary Asda, the mobile app is particularly important because it lacks the richness of data on shop-ping habits provided by a loyalty scheme. According to Asda’s chief executive Andy Clarke: “This is another opportunity for us, with customers’ permission, to gather data… Every customer has a choice

whether they want to accept free wi-fi, so giving us permission to talk to them about the Asda busi-ness in-store.”

But there are obstacles for retailers and loyalty schemes to overcome before the full potential of the smartphone revolution can be unlocked.

Martin Hayward, vice president of global digital strategy at Aimia, the company behind the Nectar scheme, says: “It’s fair to say we are still predominantly in an analogue world in loyalty. Nectar has 19 million cardholders, all engaging the benefits scheme and it’s very early days in the migration from analogue to digital world.

“There are too many different technologies, too many stores have different point-of-sale systems, different readers. And we don’t yet have the commonality of stand-ards for this migration to happen incredibly quickly.

“But theoretically we should be on the cusp of a really wonderful period in marketing. All the things we have always wanted to know – who shoppers are, who do they talk to, where do they buy – all these things we always thought we needed to know to serve them well, are now within reach.

“All this new technology should be really powerful to help retail-ers deepen their relationship with customers.”

Aimia is already building loca-

tion-based functions into its Nec-tar smartphone app, while Tesco’s Clubcard also has in-store scan-ning functions.

The danger, he says, is that mobile phones become “electronic sandwich boards” and risk irritat-ing customers with a blizzard of irrelevant information.

“There is a lot of data in a lot of people’s hands... there’s a danger it all leads to consumers being over-messaged – too many people trying to contact them, and their phone is buzzing and pinging any-time they’re walking past,” says Mr Hayward.

Similarly, mobile wallets are on the agenda for loyalty scheme operators, but the integration of loyalty schemes and contactless payments is not straightforward. Combined payment and loyalty on a mobile phone or contactless card would be a “very compelling offer”, according to Mr Hayward, but the £20 limit for mobile and card contactless payment has proven a stumbling block.

He says: “It’s something we’re

The telecommunications and payment industries are developing evermore sophisticated ways of identifying shopping habits, as Marcus Leroux discovers

Mobile anD PlastiC PaY oFF With CustoMer Data

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CoKe CouPons to go

By KATHRYN HOPKINS i-movo is capitalising on brands’ growing need to reach consumers through their mobile phones and other technology, and boost sales by offering incentives.The London-based company, which was set up in 2003, issues unique digital vouchers that can be delivered using any media, including mobile phones, e-mail and paymentcards.Since its inception, i-movo has processed almost 6 mil-lion transactions worth close to £40 million at more than 50,000 retailers. This has only been possible, according to its founder David Tymm, because it has developed a reputa-tion as a secure and reliable service.i-movo has been involved in many projects over the past decade, including helping Coca-Cola to promote its drinks brands in the UK in 2009 with an SMS offer. Retailers advertised the offer next to the drinks display, informing shop-pers that they could get one for free by sending Coca-Cola a text.Once they sent the message, they almost instantaneously

received a voucher. These were unique and could only be used once, so there was no risk of over-redemption and, therefore, of budgets being exceeded.More than 200,000 bottles were distributed to consum-ers, each for the cost of a text message and Mr Tymm was able to provide Coca-Cola with analysis by location and time, and even use till receipts to report what other products shoppers bought.“This system allows us to run sampling campaigns across thousands of retailers simulta-neously without any additional staffing costs or impact on the supply chain,” says Ed Knight, head of communication at Coca-Cola Enterprises. “The feedback we have received from retailers and consumers alike has been hugely encouraging.”Mr Tymm believes that one of the biggest advantages of i-movo’s system over paper vouchers is that it gives com-panies a daily breakdown of how successful the offer has been. Paper vouchers, on the other hand, take much longer to feed through into the system.

case study

36% 34% 17%10%

keeping a very close eye on and working towards. We need to make sure the consumer is always reminded of the loyalty scheme they’re part of at the time of pay-ment. If you listen to some of the propositions from [telecoms companies], their idea is that every phone will have every loyalty card and it will just automatically accrue points everywhere you go. If that happens the whole point of a loyalty scheme will change.”

Equally, check-in services like Foursquare have provided another avenue through which savvy smartphone shoppers can earn coupons and special offers.

For Aimia’s Mr Hayward, the crux is whether new technologies are creating value for customers and retailers: “Loyalty and offers aren’t the same thing. Anyone can bribe customers to come to your stores, by offering them half price or a free coffee. The trick is how do you get them to come back tomor-row without bribing them? How do you use technology to deepen the relationship with customers?”

£1 of f.0 0

£2 of f.0 0

£1 of f.0 0

Rewards

iNNovATioN

Source: Showrooming and the Rise of the Mobile-Assisted Shopper, Columbia Business School/Aimia

have used a mobile to check in on a location-based social network site

22%of customers have used a mobile phone to scan a barcode or QR code

36%have used a mobile to search for an online coupon

34%

have used a mobile to log on to a store’s loyalty programme

17%have paid at a checkout using a mobile app

10%Total: £67

11

A number of leading brands are already adopting such an approach to their marketing strategies.

Virgin America, for instance, adopted a new y ie ld-based approach to its Elevate pro-gramme, based around the revenue per passenger mile. Customers were able to accrue points based on ticket price and were also given extra points as soon as the aircraft doors closed. The programme led to increased revenues of 25 per cent from loyalty members and a rise in membership of 40 per cent in one year.

Outdoor clothing retailer The North Face has also taken a data-driven approach to its loyalty pro-gramme, segmenting its customer base by activity and affinity, and both rewarding its most valued customers and building stronger connections with others through its VIPeak Rewards plan.

The scheme includes a 2 per cent cashback plan designed to encourage those who bought items to make repeat visits, and has led to twice as many such visits from those taking part in the pro-gramme as other customers since its launch earlier this year.

TIBCO Loyalty Lab’s marketing platform software gives market-ers the ability to draw on data to test out marketing concepts and create high levels of engagement with customers through carefully targeted campaigns. By integrating data from a wide range of sources inside and outside the organisation, and applying mathematical analyt-ics to it, organisations can identify trends and monitor the results of campaigns in a way that no human being could.

In an increasingly competi-tive landscape and the age of big data, such processes can form the basis of a marketing strategy that will deliver increased brand awareness and loyalty, and drive higher sales from customers, again and again.

For more information, visit www.loyaltylab.com or email loyaltylab@tibco.com

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TIBCO Loyalty Lab

A decade ago, customer marketing revolved around coalition-led loy-alty programmes, with organisa-tions banking on consumers being attracted to their brand on the back of a wider package.

In time, though, these became dif-ficult to manage, and the appeal for customers and participants alike started to wane.

Alongside this, however, emerged new channels and ways of interact-ing with existing or potential cus-tomers, particularly through the use of social media and mobile devices. Here, the ability to deliver targeted and relevant messages through the right channel at the right time is essential, and attention switched towards the concept of customer loyalty management to drive both spend and an emotional commit-ment with an individual brand.

The ultimate aim of a customer loyalty management programme is to attract new customers, cement relations with existing ones and ulti-mately develop “brand champions” who will think of that brand first when looking to make a purchase, and actively recommend it to their friends and family.

Indeed, studies show that the life-time value of a loyal customer is ten times the value of one who considers a brand their second choice or lower.

There are four main pillars to this concept:

Customer-driven marketing

Marketers remain vital in structur-ing how and where to engage, but customers’ preferences, motiva-tions and attitudes will ultimately drive success.

Loyalty programmes

These retain an important role to play, giving customers the opportu-nity to raise their hands and opt into a relationship with a specific brand.

Wider event streams

In today’s data-intense age, organ-isations need to be able to draw on customer information, not only from their databases, but also from streams such as social media, mobile phones and other software, enabling the right message to be delivered through the right channel at exactly the right time.

Test and learn

The use of such data also enables marketers to test out concepts and strategies on groups of customers, evaluating which messages and offers are most effective, through which channel and at which time of day. The use of mathematics applies logic and rigour to creative market-ing, giving marketers confidence their decisions can be justified and will pay off.

CO

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ERC

IAL FE

ATUR

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Marketers need to leverage technology and draw on data to engage with customers through carefully targeted campaigns, says marketing loyalty guru David Rosen

TIBCO Loyalty Lab’s marketing platform software gives marketers the ability to draw on data to test out marketing concepts and create high levels of engagement with customers through carefully targeted campaigns

Lifetime value of a loyal customer is ten times the value of one who considers a brand second choice or lower

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customer loyaltycustomer loyalty

08 09

Ȗ As buyers purchase and interact with brands in new ways, the oppor-tunities for marketing are immense. But the sheer number of options can paralyse loyalty planning.

Experts warn that businesses need to understand the effect of new sales channels on different demographics, including the grow-ing effect of social media activity. Research by loyalty consultancy Aimia found that 56 per cent of women have “liked” a brand on social networks, compared to 44 per cent of men. Mobile usage is also encouraging longer activity on the sites.

Professor Ram Ramanathan, at the University of Bedfordshire, says that in addition to young people, “those in their 40s and 50s really use social media, and many interact with brands”. He adds: “It’s no longer about multichannel, in store and online, but omnichan-nel, given all the newer outlets.”

Facebook, Twitter and Pinterest are often cited as among the key social media venues for a loyalty battle. Professor Heiner Evan-schitzky, at Aston Business School, says that intention to purchase is increased significantly when “brands provide infrastructures for personal, topic and review content”.

Consumers are drawn in by brands that provide an unusual social media experience, according to Dr Mariann Hardey, of Durham University Business School. “Nike is particularly clever in encourag-ing consumers to create video content for the brand and users get a lot of hits on YouTube,” she says. “Consumers like to share this content and take up offers their friends have accessed.”

But buyers are also taking to social media to attack brands. Vin-cent Mak, a lecturer in marketing at the University of Cambridge, recalls a campaign by Chevrolet to launch an SUV (sport utility vehicle), encouraging customers to design commercials. “The problem was that there was a lot of satire in the material, including showing the negative environmental effect of large cars,” he says.

Consumers tend to react most on social media or review sites after extreme positive or nega-tive experiences. Thomas Brown, associate director of research and insight at The Chartered Institute of Marketing (CIM), says reviews are very influential. “While con-

CoNSUMer HABiTS

Businesses need to keep pace with rapidly changing buyer behaviour to engender customer loyalty, writes Leo King

KEEP YOUR CUSTOMERS BY UNDERSTANDING ‘NEW’ LOYALTY

Ȗ Over the past few years, two fac-tors have significantly influenced the consumer environment – reduced household disposable incomes, and the exponential growth of social media and mobile devices through-out the purchasing process.

The former has led to an increasing use of discounting, couponing and money off com-modities, such as petrol, across many loyalty programmes.

The latter has put consumers in control of brand engagement and the purchasing process, online or in-store, through the ability to “like” brands, broadcast the shop-ping experience, send content viral, compare prices and socialise offers.

Our conversations with US and UK retailers and technology inno-vators, reflect these developments, and suggest four themes that will determine future loyalty strategies.

Lower cost loyalty pro-grammes that differentiate from competitors and enhance emo-tional engagement with the brand.

Deeper engagement with, and relevance to, customers through mobile and social media in-store, on the go, and online.

Integration of mobile with legacy point-of-sale systems, other customer relationship management (CRM) and loyalty data platforms.

Ownership of customer and transaction data and the means to derive insight and value from that data.

While price matching, coupon-ing, card-linked offers, cash-backs and the likes of Groupon, will remain entrenched features of the customer marketing and loyalty landscape, many brands and retail-ers will be looking for alternative ways to build customer relation-ships as we come out of recession. There are two reasons for this.

The first is that discounting and money off has significant gross margin impact, and often does the opposite of creating loyalty.

For example, one of our US com-

panies recently ran a quantitative survey across 10,000 households looking at the effectiveness of supermarket petrol discount loy-alty programmes. The survey found that such programmes would fail to secure the loyalty of core customers if they were presented with a more emotion-ally engaging and more attainable alternative.

The second reason is that digital mobile devices and social media offer a new paradigm for building stronger customer relationships. We can already see examples of this.

In the United States, Catalina Mobile aims to transform the in-store experience by real-time integration of offers and prod-uct information with CRM and loyalty databases via hand-held mobile devices. Here in the UK, Asda is trialling something similar with an in-store wireless-based mobile  platform.

Mobile media is increasingly purchased by real-time bidding, demand-side platforms that auto-mate advertising placement based on customer response and return on investment.

TV media and programming is also being revolutionised by digital and mobile. The likes of Shaz-zam and other innovative Silicon Valley start-ups will soon enable consumers to interact and respond to broadcast advertising, offers and entertainment content in real time via second-screen devices that automatically identify what you are watching. Broadcast offers can be captured in digital wallets and prime-time shows commissioned on the basis that they are “made for mobile interactivity”.

In social media, viral content will be developed into subliminal product placement within user-generated content.

These new developments will, subject to customer consent, ena-ble brands to track the customer’s multichannel journey from first awareness through to purchase. As this happens, brands will be able to put the customer first, which is when genuine customer loy-alty begins.

However, the realisation of this potential relies on integrating mobile with legacy point-of-sale systems. This is challenging for sophisticated retailers let alone across the highly fragmented sys-tems environment in most devel-oped retail markets. Until this happens, much of the digital and mobile promise, and its implica-tions for customer loyalty, will remain unfulfilled.

opiNioN

Data, MobileanD soCialBUSINESS AND CONSUMER BUYING HABITSThe future of customer loyalty lies in engaging the emotional involvement of consumers using data and successfully responding to mobile and social trends, says Duncan Stirling

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sumers used to be extremely loyal to brands, we now see them closely examining ratings and social media comment,” he says.

Given the worries around how to handle these interactive chan-nels, the more traditional loyalty cards, still used by many consum-ers, remain a significant option for businesses and a way to garner data.

However, according to statistics from loyalty firm ICLP, only half of consumers receive the type or imme-diacy of rewards that they expect.

Mark Bergdahl, director at Loy-alty Consulting UK, calls for imagi-native options. “Consumers are a little tired of some card schemes. They are not having the effect they used to because people are being supplemented with so many extra deals and vouchers,” he says.

Good loyalty cards need to go beyond discounts and help with spending management, accord-ing to Professor Evanschitzky, at Aston Business School. This, he says, is because research shows traditional cards “prompt rational, transactional behaviour which does not increase true loyalty”.

Meanwhile, daily deal sites, such as Groupon and LivingSocial, are on the up, as consumers look to find affordable offers near them, from restaurant and hotel dis-counts, to spa days, entertainment and sports.

Between April and September, nearly one in ten people in the UK purchased at least one offer, according to statistics from web-site Deal Zippy.

Peter Briffett, UK and Ireland managing director at LivingSocial,

explains that consumers often actively seek discounts, rather than waiting for marketing e-mails. “People increasingly come to us directly,” he says. “It’s a real shift in the last few years from the pre-ferred way of us e-mailing them.”

LivingSocial notes that the larg-est part of its audience is aged 25 to 40, 65 per cent of whom are women. It awards extra discounts to followers on social media who share offers.

Meanwhile, competitor Grou-pon has launched a search-by-map functionality called Local Hub, which enables consumers to search for deal types on a map of their local area. There have also been more than 50 million down-loads of its app.

Personalisation plays a vital part in all loyalty schemes, from daily deal sites to loyalty cards, but cus-tomers have mixed views about giving out their data.

According to Aimia’s Digital Loy-alty Survey, 70 per cent of consum-ers are happy to accept voucher offers for products they purchase regularly, but are less content with product recommendations from lifestyle data.

The popularity of Amazon’s per-sonalised product recommenda-tions is evident, with nearly 60 per cent of consumers accepting the data usage, whereas approximately 40 per cent of consumers like Google and Facebook doing the same, and 30 per cent trust cable and energy providers in this area.

One thing is clear – trust around data is crucial. “Customers expect absolute transparency on how their personal information is collected and used,” says CIM’s Mr Brown.

Newer mobile services, such as location-based marketing, where users receive messages from stores nearby, offer an opportunity, but also present concerns. “For the moment, there’s no real killer app that people like,” says Mr Bergdahl at Loyalty Consulting UK. “And consumers may find some of the targeting an irritant.”

Aimia has mapped out what it calls “four futures” of targeted marketing, ranging from positive scenarios, in which trusted rela-

tionships are built, to a dire option, in which consumers become angry at the deluge of promotions.

Martin Hayward, vice-president digital strategy at the company, calls for very careful application of data. “Used the right way, all of the new channels can be very important and very useful to con-sumers, but ‘offer anarchy’ must be avoided,” he says.

Business purchasers are no exception to digital interaction with suppliers and they often take up the volume discounts offered in standard loyalty marketing.

Young staff are the most likely to make large purchases for their company online, according to con-sultancy Acuity Group. It found that in order to retain loyalty among business buyers, the key factors are strong security, fol-lowed by free delivery, live chat and improved online services.

Professor Hakan Hakansson, a founding member of the Industrial Marketing and Purchasing Group, explains that businesses “don't just want to buy, but to work together”.

“Digital channels don’t take away the need for closeness between businesses and personal

relationships will always remain,” he says. Linking systems is a crucial part of co-operation, how-ever, enabling firms to “operate together on costs and calculations, and to improve efficiency”.

Mr Brown adds that LinkedIn is becoming a popular way for busi-ness buyers to interact with suppli-ers. “Buyers like it when brands are offering ideas, and sharing knowl-edge and experience,” he says.

Dr Mak, at Cambridge Univer-sity, says that while, typically, “business purchases are less emo-tionally driven”, when suppliers handle social media well, and also provide good online services and are helpful on the phone, “there can be a positive effect”.

Buyer behaviour is changing apace and businesses must know what their customers like – and not rely on generic data alone. A proper understanding of new and traditional channels, combined with a respect for data, can lead to a real understanding of loyalty and will improve customer retention.

Co-founder of KEM Investments,

Duncan Stirling was involved

in Loyalty Management UK’s

development of Nectar

Personalisation plays a vital part in all loyalty schemes, from daily deal sites to loyalty cards, but customers have mixed views about giving out their data

CUSTOMERS HAPPY FOR PERSONAL DATA TO BE USED FOR SPECIFIC PURPOSES

How happy are you for companies to use personal information in the following ways?

source: Digital Loyalty Survey, Aimia

Product recommendations based on lifestyle data

Targeted advertisements based on web-browsing history

Voucher offers for products pur-chased regularly

Product recommendations based on shopping history

How happy are you for the following companies to use your data?

64% 55% 50% 43% 40% 37% 32% 30%

18%15%20%14%15%35%33%46%

Data used to personalise offers

Willing to provide more data

Bank Amazon.com Mobile provider Credit card provider Cable provider Energy providerGoogle Facebook

CuSTomeRS CHASiNg A quiCK deAl AS A loyAlTy iNflueNCeR

source: Deal Zippy

of the population have purchased a daily deal in

the last six months (no consideration for repeat

purchases)

9.6%

daily deals sold

5,956,880 dAily deAl

generated by 126,778 most popular deals using a half-

price Starbucks e-card

£633,590 source:

2013 State of B2B Procurement Study,

Acuity Group

CHANgeS To BuSiNeSS-To-BuSiNeSS PuRCHASiNg HABiTS - loyAlTy iNflueNCeRS

Age groups who are happy to make purchases of $5k or more online

18-3536-4546-60

60+

90%68%45%29%

Factors making online procurement more likely

A BCDEFG

51%39%37%30%29%24%21%

AIncreased security

BFree delivery

CCustomer service representative available on the phone

DImproved online customer service or live chat features

GMore customer-friendly design

FFaster delivery than a catalogue order

EBetter sources for research online

LOYALTY CARD

10 11raconteur.net twitter: @raconteur raconteur.net twitter: @raconteur

customer loyaltycustomer loyalty

10 11

Ȗ Whether it’s shoes, the broad-band or a holiday, the fruitless phone call to a bored call centre operator is one of the more frus-trating experiences of life as a modern consumer. And it’s not good business either.

“Everyone must have rung customer services where you are promised a result and nothing happens,” says Chris Smart, who lectures on business at City Uni-versity. It’s not usually the call operator’s fault though because businesses that really care about customer service make sure it works.

“Ideally it’s sorted and then you get a follow-up call to check you’re happy with the service. That’s probably down to how the company is run – how they train staff and how well managed it is,” says Dr Smart.

Though customer service is often a department by itself, busi-nesses that really get customer service right, put it at the centre of

the organisation, recognising that it pays off in loyalty, efficiency and even new business.

The same goes for the systems that store customer service information – the CRMs or cus-tomer relationship management systems. They should not just be an add-on to day-to-day business processes, says Dr Smart, they should be deeply integrated.

“A good CRM lets you pull together all the data of a particu-lar customer to one point. So if a person calls, then the responder can try and deal with the question in a joined-up manner.”

The CRM itself won’t fix your customer’s holiday booking – it’s simply a software tool – what it can do is help you fix it.

“The key here is not the tech; the tech is an enabler. Whether it is effective is down to the com-pany. To use CRM effectively you’ve got to design your com-pany process to take advantage of the technology.”

Gene Marks used to sell CRMs. “They are terrible when they are not implemented the right way,” he says. “They are terrible when companies don’t appreciate that all of these magical applications are nothing but databases and companies don’t put the right processes in place to ensure that all interactions are entered into this database so that the data can be properly used for further sales, marketing and service interactions.”

Ȗ There is a strange contradiction in the mobile phone sector. Con-sumers love nothing more than to complain about the cost, recep-tion or customer services of their phone providers, yet few ever do anything about it.

A YouGov survey this month found that two thirds of mobile phone owners have been with the same network for at least three years while half of us have never switched. Britain may be one of the most competitive markets in the world, but it also seems to be one of the stickiest.

That does not mean that the net-works can take customer loyalty for granted. Churn, the rate at which customer’s defect to a rival network, is the Achilles’ heel of the industry. Most mobile phone companies have backed away

have been downloaded more than 111,000 times.

Another technological innova-tion that mobile phone compa-nies have embraced is solving the problem of flat batteries. Orange pioneered this with its “Chill ‘n’ Charge” tent at the Glaston-bury music festival and a solar-powered charger. Vodafone has since developed a high-tech truck that has been kitted out with biometric technology. Vodafone customers place their palms on to a scanner which makes a map of the veins that is then linked to the phone being dropped off to charge. This ensures that the thousands of identical iPhones left in the truck are quickly returned to the right owner and also wows the customer.

Fi Cranfield, head of sponsor-ship and events at Vodafone, says: “We’ve focused on offering our customers something that they

And that is something you have to work at.

“They are terrible when compa-nies don’t assign strong adminis-trators, or when they cut corners on training or try to do too much at one time. They are terrible when senior managers don’t pay the attention needed to make these systems successful and instead cave in to the complaints made by lower-level employees who don’t want to do the extra work.”

It’s not just about avoiding com-plaints, good customer service can keep customers coming back for

years and turn them into advo-cates for your company.

It can also be a trump card for traditional companies as they face competition from digital competitors.

That’s the idea behind an inno-vative customer service app from Richard Russell, an entrepreneur whose product Wlcome is a new kind of CRM that aims to bring to bricks-and-mortar shops the kind of customer relationship man-agement currently only possible online. It’s a tool for real-world shops that lets you recognise

Computer software can help provide good customer service, but it’s staff, proper training and a positive company ethos that make it work, as Anna Leach reports

Mobile phone companies and network providers are developing technology which is encouraging users not to switch, writes Nic Fildes

CUSToMer ServiCe

BOOST LOYALTY AND WIN NEW BUSINESS WITH THOUGHTFUL CUSTOMER SERVICE

tECH bEAtinGPHonE CHurn

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MoBiLe really value and that is exclusive to them. People used to go to fes-tivals to get away from it all. Today it’s the reverse. People want to be able to keep in touch and share their experiences.”

O2 has launched a host of apps not normally associated with mobile phone companies to shore up its user base. It uses the GPS (global positioning system) chip in a smartphone, typically used for maps, to pipe offers to subscribers based on where they are. Offers range from cinema tickets to sushi or train tickets with the company’s role in the bargain highlighted when the user zaps their phone to redeem a voucher code.

The network has also developed more practical apps so that cus-tomers have more transparency over their accounts. O2 users can keep track of their bills and data allowances via an app that

people when they step through the door, rather than after they’ve pulled out their store card or explained themselves.

“Online stores compete very well on price and stock, but where they can’t compete so much is customer service,” says Mr Rus-sell. “In a bricks-and-mortar shop, you actually have a person there. And no matter how smart websites get, one of the ways that high street retailers can compete against online markets like Ama-zon is service.”

In many ways, a good CRM tries

to replicate what used to happen when you walked into a local shop, and people knew your name and your order, whether it was a butchers or a greengrocers.

“The bricks-and-mortar shops are likely to have zero informa-tion about their customers. All they might have is what an indi-vidual shop assistant remembers about a customer; what they bought, that they like football, where they went on holiday,” says Mr Russell.

The app works by recognising your mobile phone as you walk in the door, flashing up your name, usual orders and potentially much more to the shop assistant. That means assistants you’ve never met could greet you by name when you walk in. Currently on trial in two coffee shops in London, it’s an example of how big opportunities can lie in the seemingly mundane area of customer service.

You don’t need fancy technology though; at the heart of any CRM is a big database that can be called up from many different points.

“The key is being able to keep a record of the interactions,” says Dr Smart. “If used effectively, a CRM ought to help reduce the costs of dealing with or servicing customers. Rather than using a complex chain of different people doing different parts of a process, in a well-designed CRM one per-son is able to put something all the way through.”

Thinking through customer service can completely refocus your company, he says. “A large part of the success of CRMs is to do with turning an organisation inside out – from being focused on internal processes to focusing on the customer and trying to satisfy what they need.”

Come together right now...

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is typically viewed nine million times a month. It is planning to launch a service that will allow its users access to account infor-mation via Twitter by tweeting a pre-registered hashtag that will trigger a direct message with the desired information. The company has also invested in a free video service via YouTube called Guru TV that instructs people how to get the most out of their smartphones.

Such innovations are in their infancy and will be honed to per-fection as smartphones become more powerful and technological breakthroughs, such as mobile commerce and location services, improve. Proving that the more services customers want to use and pay for is becoming the key to reducing churn and cutting cost in a sector not tradition-ally known for its customer service prowess.

from the gold-rush mentality of signing up as many customers as fast as possible. Instead reducing churn and retaining the subscrib-ers you have has become the new mantra. Grabbing someone else’s fickle customers is far more expensive than keeping the ones you have happy.

The smartphone revolution has provided the likes of Voda-fone, EE, Three and O2 with the means to increase loyalty. The best way to keep custom-ers on side a decade ago was to cut prices or throw monetary incentives at them which come at the expense of profit mar-gins. Yet the computing power of the smartphone means a much smarter approach can be tailored. Apps, in particular, can play a big part in generat-ing a relevant data service that will deter a subscriber from jumping ship.

Vodafone, which once embla-zoned its logo on Manchester United football shirts at great cost, now spends a more modest budget developing apps for Lon-don Fashion Week and the vari-ous music festivals it sponsors. Whether it’s a heavy metal fan off to Download or a pop fan fer-rying across to the Isle of Wight

Festival, a free branded app with show times and exclusive content can be genuinely useful. Offering tickets in advance to customers is even more enticing as is access to special viewing platforms at the show. No wonder its apps

thinking through customer service can completely refocus your company from being focused on internal processes to focusing on the customer

Total: £67

11

find out about the latest handsets on offer from manufacturers.

Customer experience, though, goes beyond driving sales. OpenText also provides the communication plat-form for Transport for London (TfL) incident reporting, which they use to log any service delays. This informa-tion is vital for the organisation’s own internal processes. The monitoring of incidents allows TfL to produce accurate and timely statutory and performance reporting. By learning from past incidents, they aim ulti-mately to improve the service to their growing numbers of customers.

AkzoNobel, meanwhile, has seen real value internally in being better able to manage its data resources. The business relies on content, such as images and video, to market prod-ucts to customers, but would often find different departments paying out money for new shoots. With all resources now stored centrally, the company estimates it is saving £500 for each photograph it can re-use across multiple channels, giving an annual cost reduction of £15 million.

Being able to correspond with and engage customers effectively is essential if businesses are to pro-tect their brand and drive sales in the current competitive landscape. Customers now expect to be able to do business how and when it suits them, and those that are unable to deliver that experience risk losing them to competitors. The key to this – and to those internal efficiencies and compliance with regulations – lies in effective data management. Only those that have such capabilities can really hope to succeed.

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Data managementto target customers

Organisations need to ensure they can present their customers with relevant offers and communication at the right time and place – and in the way they have chosen to interact.

To do this, businesses need to be able to access data from a wide range of sources – customer rela-tionship management (CRM) sys-tems, enterprise resource planning (ERP) packages, social media appli-cations or external databases – to help them make targeted communi-cations that can ultimately drive cus-tomer loyalty and sales. If it’s going to be sunny for the next week in an area where a customer lives, they could receive promotional offers for shorts, for example.

For many businesses, however, such data is stored in disparate sys-tems, owned by different parts of the organisation. Many companies have grown organically, developing sepa-rate solutions for mobile communi-cations, printed correspondence and their own internal back-end systems.

An effective enterprise information management package can bring all these elements together, reaching out across customer service, market-ing and sales teams. Such a package can either migrate data over to a cen-tral system or pull information from

a range of sources and bring it into a new set-up gradually. This gives the ability to ensure customers receive the same message across any chan-nel, whether that’s internet, mobile, in-store, printed correspondence or any internal communication packages.

OpenText has worked with a num-ber of well-known organisations to help them enhance customer experience or improve their busi-ness offering. For instance, Nation-wide, one of the UK’s leading build-ing societies, turned to OpenText to help manage the process of setting up new ISAs for customers, to help it comply with financial regulations.

As a result, this enabled Nation-wide to eliminate three million pieces of paper a year and significantly reduce the amount of time it took to set up a new customer’s business.

Telecoms firm Three uses Open-Text’s communications management solution to deliver targeted messages and special offers to each customer every month, ensuring they receive the same content regardless of the channel. The business has also real-ised it can use these communications to boost revenues, offering advertis-ing space to partner companies on the printed statements it sends out each month and helping customers

CO

MM

ERC

IAL FE

ATUR

E

In today’s fiercely competitive economy and with new sales channels emerging all the time, developing closer relationships with customers is more important than ever, says OpenText

OpenText has worked with a number of well-known organisations to help them enhance customer experience or improve their business offering

OpenText's communications management solution delivers targeted messages and special offers to customers each month

DRIVE CUSTOMER LOYALTY AND SALES

An effective enterprise information management

package can migrate disparate data over to a central system

Businesses can experience real value internally in

being better able to manage its data resources

12 13

customer loyalty customer loyalty

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Ȗ As anyone who pays attention during TV advertisements will know, companies are participat-ing in an arms race to give their customers more – a free railway travel card here, a bespoke foun-tain pen thrown in there, a case of wine for customers who buy x and a subscription to a current affairs magazine for those signing up to y. Bonus points go to the firms who think of colourful induce-ments that get their offer quoted on money-saving blogs and men-tioned on Twitter. The slogan “We go further” neatly summarises the prevailing strategy for winning and keeping customers.

All of which represents a misun-derstanding of consumer behav-iour, according to a new book. In The Effortless Experience: Con-

quering The New Battleground For Customer Loyalty, authors Matthew Dixon, Nick Toman and Rick Delisi attempt to compre-hensively debunk the notion that going further for customers is a worthwhile strategy. In fact, they say, what companies need to do is simplify their offering and make the consumer’s experience as low on effort as possible. Effortless, frictionless and fast are the things that drive loyalty, not frills and going the extra mile.

Based on extensive research into people’s experience of customer service in particular, and survey-ing 97,000 customers, the book claims there is almost no differ-ence between the loyalty of those whose expectations were exceeded by a company’s customer service and those whose expectations were merely met. The authors therefore claim that companies grossly underestimate the benefit of simply meeting expectations and throw unnecessary resources at the task of exceeding them.

What consumers want is not to be “delighted” – to borrow the book’s chosen term for describing surpassed expectations – when they communicate with a company about a problem or have a question, but quickly and efficiently satisfied.

“With the majority of companies, the customer service interaction is fraught with what we call high-effort experiences,” says Mr Delisi, who like his fellow authors works for business advisory service CEB. “Ultimately you want to make a customer feel like ‘this was much easier than I thought it would be’ rather than ‘you lavished me with some sort of extras or went out of your way to apologise to me, or you put me in some sort of special category’. Customers can

CUSToMer eXperieNCe

opiNioN

PLAYING IT BY THE BOOK

loYaltY in banKing is a Case in Point

An effortless experience will retain loyalty rather than thrills and frills, as Joshi Herrmann reports

RBS head of digital Chris Popple describes how the bank set about developing mobile banking based on customers’ feedback and needs

the bank’s main source of information is its customers – we interact with them daily, via social media, to communicate and repair situations proactively, as well as strengthen relationships

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groWing trenD in selF-relianCeseLF-seRVIce

Paying staff to roam tills and shop floors at the times they are needed is one of a retail business’s biggest challenges – and costs. At the same time, not being able to find a sales assistant or having to wait too long in a queue are two of the most frequently aired customer complaints. So new research that shows a clear consumer appetite for self-service will be enthusiastically

received in the business community. In their Customer Experience Survey, Cisco asked 1,514 respondents of all age groups and from ten countries about their preferences when shopping. The results showed a higher than expected enthusiasm for conducting research and purchase outside the usual face-to-face encounter. Some 52 per cent surveyed

said they would rather use a self-checkout station than wait in line to pay, while 43 per cent would use their mobile phone, while browsing the store, to research products further. Some 57 per cent said they liked using touch screens, such as the ones provided at shops like Argos. Their answers point to a customer base who value speed over personal reassurance and want control over the research

that they do into products. Software firm Synthetix released research among UK and US consumers earlier this year, which showed that web-service is now the channel of choice for after-sales service, with 90 per cent of consumers checking a website first before e-mailing or phoning. And a survey by Zendesk found 19 per cent of Twitter users have used the site for web self-

service and that the internet self-service industry grew from $600 million in 2011 to $1 billion in 2012. Costa’s Costa Express self-service coffee mini-bars, dozens of which are now dotted across London, is one recent example of a company trying to capture the desire of busy, tired consumers to have control over their purchasing and not feel they are being slowed down by others.

see through those things,” he says. The book highlights its point by

describing how many companies treat their customers either as “callers” or “webbers” and don’t record in their data that many only call because the web hasn’t proved as effortless as it should have done, a phenomenon described as “chan-nel switching.” Some 57 per cent of customers calling a company tried to use their website first, demon-strating both a damaging problem and a major cost-saving opportu-nity for firms willing to invest in useful and usable websites.

How applicable, then, is the book’s argument about the value of meeting expectations and the low value of exceeding them out-side customer service, in an online selling situation or with supply-chain delivery?

Joe Fogg, business develop-ment director for supply chain solutions at supplies and logistics firm arvato, says making things effortless rather than elaborate

is indeed key for his clients. “Frictionless is what we call it,”

says Mr Fogg, pointing out that the supply chain from a web purchase fails entirely for the customer if it does not fulfil basic demands like on-time parcel delivery. If a pack-age arrives 24 hours earlier than a customer expects it to, that may be appreciated, but it isn’t hugely relevant to the customer’s view of the company. Delivering later than the promised time, though, is disastrous.

Mr Fogg also cites a figure from a UPS report that says 63 per cent of online buyers abandon their basket at the end of the process rather than buying – a rate of failure that would be comical were it repeated in real shops. That figure is “alarming”, he says, and shows the web purchas-ing experience being offered “isn’t quite right”, including the mistake of not being transparent with cus-tomers about shipping costs until late in the process.

He says one of arvato’s clients,

gift website Firebox, have recently revamped their website in the hope of making it more friction-less and are reporting greater success. “They have tried to give people only what they need to know – clear, concise informa-tion,” says Mr Fogg. “Fewer words would probably come into it – clearer options.”

Marketing consultant Paul Brewster believes Amazon are “the greatest exponents of fric-tionless shopping”, pointing out that they filed a patent application for their 1-Click buying function in 1997. “It is not about fancy graph-ics or having the lowest prices on the web,” he says. “Do not create unnecessary friction by forcing your customers to jump through hoops or go around in circles.”

Applied rigorously, that mantra could end up saving companies a lot of time and effort, and prove just as effective for retaining cus-tomer loyalty as the giveaways and attempts to wow.

Ȗ I recently came across an e-mail from a customer; they wanted to know why they could only see six transactions on their bank-ing app, but far more online. It’s a good question and apparently one that others had contacted us about. We fixed it and introduced a much longer statement history for customers to view on their banking app.

Now that customer and the millions of others, who regularly use mobile and tablet apps, can see more detail on their accounts without touching a paper state-ment or going near their desktop.

This is how we began to create and develop mobile banking – a helpful service which was based on customers’ feedback and needs. We started out more than five years ago, with a very modest investment of £50,000, and a handful of incredibly enthusiastic internet specialists.

We initially focused on smaller and more basic services, such as SMS text alerts. The reaction from customers bowled us over and has only grown since then. In a single year, from July 2012, we sent more than 29 million alerts, telling customers their balance

and recent transactions, and if they were nearing or already in their overdraft.

But that was just the tip of the iceberg; customers wanted more and, based on their feedback, we’ve gradually expanded what mobile can do. We now move over £2.6 billion in payments and transfers every week, and we’ve extended the services we offer like “Get Cash”, which allows customers to leave their debit card at home and withdraw cash with a generated secure code at any RBS, NatWest or Tesco ATM.

Another service is “Pay Your Contacts” which lets customers send money to anyone with a valid UK Visa card, using only their mobile phone number and no lengthy registration process.

It’s about simplicity, making sure customers can do their banking quickly, efficiently and easily. We have developed apps for iPhone, iPad, BlackBerry, Android and Windows, which are simple and easy to use. A customer can login and check their balance in 9.5 sec-onds flat – that’s faster than Usain Bolt can run 100 metres.

But really good digital services are not just about making things simpler; they also provide a unique opportunity to build a really strong relationship with the cus-tomer. Webchat was developed in 2012. It took an existing online banking telephony helpdesk and converted it into a free, silent and 24/7 way to engage with custom-ers. Webchat now handles more than 30,000 chats a week and gen-erates over 1,200 new sales.

In fact, the bank’s main source of information is its customers – we interact with them daily, via social media, to communicate and repair

situations proactively, as well as strengthen relationships.

We are now looking ahead to work beyond traditional banking, to work out how we can help peo-ple do more with their money. One development we’re looking into is utilising customers’ expendi-ture data to provide them with more detailed statements, and rewarding them for their spend-ing through our relationships with major retailers and partners.

A focus on customers’ needs has resulted in 2.5 million peo-ple using RBS apps, on average 27 times each month, and we reached a major milestone of one billion logins to our apps just last month.

But not everyone, particularly older people, has a mobile device or understands how to use the technology. So how do you reach these potential digital banking customers? The answer – “digi-zones” with iPads across flagship branches, with trained advisers who can demonstrate digital services and the opportunities they hold.

One of the key successes of our digital services is that they appeal to everyone, from 18 to 80 years old. I’d like as many of our custom-ers as possible to experience how useful they can be. You don’t even need a mobile phone or tablet to experience the way we’re trans-forming digital banking.

While there may be market pressure to innovate for innova-tions sake, our net promoter score indicates a customer-focused approach is valued by customers themselves. As long as they use the app, and feedback on what works and needs to change, we can con-tinue to develop our services.

Chris Popple is head of digital at

the Royal Bank of Scotland

Dear big sexy brands,

We are concerned for your future – people don’t trust you any more.

But you can win them back and keep them loyal if you just move a little bit closer.

Give your audience a rewarding user experience with your digital products and they’ll love you again.

We’re all about giving good UX at ustwo. Call us and let’s make your brand really do it for people: 020 7613 0433

ustwo.co.uk

dreamers and doers

14 15raconteur.net twitter: @raconteur raconteur.net twitter: @raconteur

customer loyaltycustomer loyalty

14 15

Ȗ In the spare room of a West London flat, the Tesco Clubcard was born. Clive Humby, a math-ematician, had just given up his job at CACI, a firm of market ana-lysts, where his wife Edwina Dunn worked. She was fired on the very same day.

As dunnhumby, the company they created as ambitious twenty-somethings, they began to tinker with data mining and loyalty schemes. Tesco became interested and had them undertake a trial, the results of which were presented to the company board. Lord MacLau-rin, then chairman of Tesco, said after the presentation: “What scares me about this is that you know more about my customers

CoLLABorATioN

Like-minded businesses are coming together to offer wider benefits in combined customer loyalty schemes which also scale up rich consumer data, writes James Dean

FooD anD Fuel, hotels anD Flights

Companies need to tread a careful path through public sensitivity around the analysis and use of consumer data, warns James Dean

be sure not to sPoilYour ProsPeCts

privACY

Ȗ “Probably one of the cool-est guys ever,” is Harper Reed’s description of himself. “I am an engineer who builds paradigm-shifting technology and leads oth-ers to do the same. I love using the enormity of the internet to bring people together.”

Mr Reed was Barack Obama’s chief technology officer in the run-up to the 2012 US presiden-tial election. Data mining was his weapon of choice, drawing on the likes of Facebook, Twitter and various other online sources with Narwhal, his team’s purpose-built software platform.

With Narwhal, the Obama elec-tion team could find and mobi-lise voters that would have been unreachable a decade ago, and in the process raise billions of dollars of campaign money from millions of micro donations.

Hundreds of millions of snippets of data passed through Narwhal in the process. This is the “big

data” that business is becoming so concerned with, although Mr Reed argues that the term big data is meaningless because the software of today is more than capable of sifting through vast volumes of information and rapidly providing a meaningful answer.

As the oft-repeated big data case study goes, Google can predict flu epidemics more quickly than doctors. It does this by finding pat-terns in what people are googling in certain areas, such as a spike in the number of people searching for “sore throat” in Kent.

Mr Reed and the Obama team were campaigning for an election, and Google’s ability to predict an epidemic is a useful public health service. Business, on the other hand, should not assume that public data is up for grabs for com-mercial gain.

“As is so often the case when new technologies and law collide, the latter is playing an erratic game

notwithstanding the rules, the evidence suggests that consumers, on the whole, are averse to having their personal data trawled by companies

Partnerships between fuel and grocery companies or airlines and hotels appear to be logical – but some brands have begun to think laterally

of catch-up,” says Phil Smith, a director at law firm Pitmans. “The law on big data can politely be described as complex.

“By aggregating and analysing dozens of pieces of data gathered on an individual – each of which may in isolation be entirely innoc-uous – a product is created that is far more personal and sensitive than the sum of its parts; and, one might expect, deserving of greater legal protection.

“Privacy and data protection aside, there are numerous legal issues to consider, including intel-lectual property rights, competi-tion law, contractual liability and regulatory issues.”

Politicians are also wary of the power of this new phenomenon. Edith Ramirez, the new boss of the US Federal Trade Commission (FTC), warned that her agency would be keeping a close watch. “The FTC will remain vigilant to ensure that while innovation

pushes forward, consumer privacy is not engulfed,” she says.

Notwithstanding the rules, the evidence suggests that consum-ers, on the whole, are averse to having their personal data trawled by companies.

Target, a big American retailer, was able to accurately predict the delivery date of a pregnant cus-tomer and direct relevant adverts towards her. It made these predic-tions by drawing on various public data sources that, taken individu-ally, were only vaguely connected to pregnancy. One of Target’s statisticians conceded in The New York Times: “If we send someone a catalogue and say, ‘Congratulations on your first child!’ and they’ve never told us they’re pregnant, that’s going to make some people uncomfortable. Even if you’re fol-lowing the law, you can do things where people get queasy.”

A recent study by GfK, the

research agency, suggested that only a third of consumers are happy to be targeted with adverts based on information trawled by companies. More than three quar-ters thought that it was “annoying” if companies got to know them too well.

“Not everybody is ill-disposed to companies using their personal data for targeting purposes, but they are in the minority,” says Colin Strong, managing director of technology at GfK. “Consum-ers often don’t feel as if they are part of an open dialogue about the nature of the trade that is being made. I think the advertising industry is in danger of thinking in terms of algorithms and pro-grammatic opportunities while all the time losing sight of the fact that it’s a human being at the other end.”

But big data does not have to mean big advertising. “Big data pro-vides an amazing opportunity to

after three months than I know after 30 years.” That was in 1994.

The next year, the Tesco Clubcard was launched with its simple prem-ise of one point for every one penny spent. Today, dunnhumby – now majority-owned by Tesco – houses terabyte upon terabyte of customer data from which Tesco can target consumers with offers and, per-haps more importantly, draw upon to chart its marketing strategy.

The scheme has been lauded the world over for its effective-ness at retaining customers in a highly competitive market where loyalty means much less than it used to. The success of the Tesco Clubcard has spawned many a challenger, most notably the Nectar card, which now claims 19 million members, more than Tesco’s scheme.

Nectar marked a departure from the typical loyalty programme. Rather than limit customers to collecting and redeeming points with a single retailer, Nectar, which launched in 2002, opened the door to many. So, for example, custom-ers could collect 1,000 points buy-ing fuel at BP garages and redeem them for groceries at Sainsbury’s. This type of cross-company loy-alty scheme is gaining more and more traction.

Research by consultants Finac-

cord shows that the banking and retail sectors have become far bigger players in cross-company loyalty programmes since the mid-1990s. The programmes are attractive because they tend to have more members, are growing faster and have a membership made up of consumers with specific character-istics. And, like the Tesco Clubcard, members of these schemes part with a wealth of data that can be shared by all the companies partici-pating in the programme.

When it comes to choosing who to partner with, “it’s a question of how you want to support your brand”, says David Parry, a manag-ing consultant at Finaccord. Virgin Atlantic’s rewards programme, for example, offers members a “more adventurous” means of spending their points with partner organisa-tions – a reflection of the Virgin ethos. Other airlines, he says, might target the typical traveller with a hotel partnership that suits a par-ticular demographic.

One such partnership was agreed earlier this year between Delta, the American airline, and Starwood, the upmarket Ameri-can hotelier. But unlike many airline-led rewards schemes, the Delta-Starwood partnership pools rewards points from both companies, to be spent on flights

or hotels as each member wishes.Dubbed Crossover Rewards, the

scheme targets the elite, predomi-nantly business-traveller custom-ers from each company. It com-bines two brands with a strong affinity for one another and adds a touch of exclusivity as members of the Crossover Rewards scheme benefit from a raft of airline and hotel upgrades.

Partnerships between fuel and grocery companies or airlines and hotels appear to be logical. The net can easily be cast wide: people need to eat and they generally need petrol for their car; people who fly a lot, like business travel-lers, probably stay in a lot of hotels. But some brands have begun to think laterally.

Qantas, the Australian airline, recently teamed up with Spotify,

the digital music streaming service. Qantas has long had a frequent flyer scheme and from September allowed its members to buy Spotify subscriptions with their accumu-lated points.

This might not seem like a huge leap, but there is a hook: custom-ers who buy a Spotify subscription are able to access their playlists on Qantas flights without the need to be connected to the internet. The deal gave Spotify rapid access to nine million Qantas customers in one of its key growth markets, while also making a useful – and modern – addition to Qantas’ existing loyalty scheme.

These sorts of innovative cross-company loyalty schemes are being hailed by many in the mar-keting industry as game-changing and a sign of things to come.

mine for new insights about human behaviour that brands can be using to their advantage,” Mr Strong says. “Social scientists are hugely excited about these opportunities.”

Fenwick, a French forklift truck manufacturer, installed sensors on its forklifts to gather informa-tion about how they were used. From this it developed a remote monitoring service and a school for forklift drivers.

And when BT trawled its cus-tomer prospects database recently, it analysed millions of records to determine who might like what services, enabling it to tailor its approach accordingly – and cut out unnecessary sales pitches.

Big data, therefore, should not be considered solely a means to target consumers with annoying, even creepy, adverts. The ability to identify patterns of behaviour and use these to improve business strategy has already been shown to be of great value.