Loyalty cards are about customer knowledge, next step: integration with social media

Despite its recent loss of market share, Asda continues to argue that its lowest price policy is a better strategy than its main rivals’ loyalty card schemes.  I think they are wrong but not with respect to prices but because of the valuable customer data they are not collecting.  Asda simply does not “know” its loyal customers.

In Retail Week May 28^th 2010 edition, there is an interesting article about customer loyalty: “Loyalty cards: the bedrock of future success?” 

 <<[David Roth (former B&Q marketing director, now chief executive of the Store WPP)] observes: “The world is going to divide between those who can organise and make use of their customer data and the others, who will wake up in five or six years’ time, outmanoeuvred. The person who owns the data, owns the customer.”
But he maintains that loyalty schemes are primarily a means to an end and will not on their own make a retailer successful.  He says: “Gaining customer loyalty is about a lot more than a scheme. The value proposition will be important.”
For all the interest in loyalty and the success of some programmes, they will never be a panacea for retail’s ills and typically cannot answer one vital question. As [James] McCoy (Yougov SixthSense research director) says: “Loyalty schemes can tell you what people are buying - but not what they’re not buying. As well as whatever they are spending at one retailer, they might be spending another £40 a week at Lidl, which you have no idea about. The challenge is to find the data you don’t have.” >>

David Roth and McCoy are absolutely correct.  In the FMCG sector, loyalty schemes will increasingly be a necessity for commercial success but will not be sufficient by themselves to ensure competitive advantage.  Competitive advantage will first come with what is done with the information collected at the till.  Tesco Clubcard is a perfect illustration of this: I am a Tesco customer and I receive at home personalised mail including discount coupons for products that I am likely to buy based on my purchase history.

However, the true Holy Grail of competitive advantage is not in the customers’ purchase history data, it is with the knowledge of what they want but cannot find or afford, what they might buy if they were made aware of it or if it was conditioned differently, what they buy with the competition, etc…  The most valuable customer knowledge will not come from transactions at the till but from engaging with customers to get them to tell what their needs and wants are.  Luxury goods retailers have known this for centuries and have always valued and leveraged the in-store customer knowledge obtained by the salesperson through the conversations with his/her “loyal” customers.

So FMCG retailers will need to engage with the customers registered in their loyalty scheme.  Since they will have to do this through all channels, it will require a holistic approach to customer identification: So this means one account per customer for all channels.  This might seem obvious but I have not yet come across a single retailer (from FMCG to luxury) with such a pervasive integration strategy.  For instance, all retailers with a Facebook page do not integrate the Facebook account with the ecommerce customer account: This means no systematic way of tying up a customer’s comments on Facebook with his/her online (let alone offline) purchase history.

<<Tesco is one of the most advanced of retailers in its ability to mine customer data and use it effectively and, notes Shore Capital analyst Clive Black, has put its scheme at the heart of its business, rather than run it as an add-on.>>

Similarly, in the next few years, retailers will gain competitive advantage from putting social media and all customer interactions at the heart of its business, rather than run it as a an add-on.

There should be no box to begin with!

I was recently reading the profiles of the Association of MBAs regional committee and this phrase attracted my attention:
"[Derek Chesire believes] that 'out of the box' thinking does not exist: there simply should be no box to begin with".

Yes absolutely! I like this simple way to put it.  I suppose what he really meant is that out of the box in fact does exist but is mostly ineffective at generating innovation and competitive advantage.

An organisation with a culture not conducive to creativity where knowledge sharing and spontaneous collaboration is not encouraged and rewarded, will eventually feel the need to ask from its employees to "think outside the box" in the hope that some good ideas will come out of the exercise.  Out of the few good ideas that might come out, only very few of them (if any) will lead to an innovative implementation.  This is because this process (idea through to implementation) requires an environment where mistakes are not only permitted but encouraged, where work outside initial job description and spontaneous collaboration is natural and rewarded.

When an organisation with an organisational culture not conducive to knowledge-sharing and creativity ask its employees to be creative, it is a bit like asking a group of junior mechanics to build a racing car from a pile of spare-parts, without the authorisation to collaborate with one another! You might obtain a car eventually but very unlikely competitive.
It's much more effective to let the group of mechanics organise themselves as a team and let them work out what they can build together.  That way, they could come up with the next F1 concept car!

How will luxury Brands be creatively different with ecommerce?

Read Fadi Shuman’s (Pod1) very informative article about ecommerce in the luxury market. 

Fadi might be correct that “2010 will be the year that the majority of [the luxury] brands jump on the e-Commerce bandwagon”.  The latest purchase of Net-a-Porter.com by Richemont supports this statement.  But I have yet to be convinced that these same brands have worked out a way to reproduce on the web what made them different on the high street: uniqueness, exclusivity,  high quality, dream-making image, personalized customer services, refined and luxurious stores, best store locations, etc… As Marci Ikeler (Publicis) puts it in her excellent slideshow I referred to in a previous post :

“How do we use the web to tell a luxury story?” Or “How do we recreate the sensorial experience of the brand online?”

 Fadi refers to Faberge and its site with a very exclusive access or the ecommerce pioneer Burberry’s use of social media for an interactive approach around its catwalk shows.   Marci does provide other examples or innovative online initiatives from several luxury brands but we have yet to see the same level of creativity and innovation with their ecommerce. 

I have checked out several (ok not all of them, but let me know if I missed one that contradicts my point and that will be the exception that confirms the rule as we say in France) of the oldest or more recent luxury brands’ ecommerce sites (Cartier, Burberry, Prada, Louis Vuitton, Dior, Dunhill, Gieves and Hawkes ) and all of them failed for me at the first main hurdle, well before making the first purchase!  And this is a key feature of a luxury brand store: the special experience starts with the shop windows and continues throughout your visit of the store through primarily excellent customer service, even if you end up buying nothing.  Before leaving you might have exchanged a lot of valuable information with one (or more) sales staff.  You might have given for example your contact details, your preferences, your sizes (for clothes).   You might have been told specific details about products of interest, what is in stock, what is about to arrive or about to run out, what is very popular, etc…  I am assuming here that you are a new visitor to the store, not yet a customer of the brand. 

Now, what did I mean by stating that the luxury brands failed this first hurdle related to the pre-sale experience?  Well, let’s start with the fact that for most of the sites I visited and browsed the products available to purchase online, my visit has only contributed to the website analytics but the brand does not know I – as a specific person – visited its site.  This is simply because my credentials were to be requested only at the purchasing stage.  Worse, in most cases even though I was willing to provide my details, there was no way to do this without buying something!  Gieves and Hawkes, Dunhill and Louis Vuitton did cater for a pre-sale registration.  However, in both cases the benefits of doing so are limited and lack creativity.  Typical facilities available once registered are:

• Create and share your personal wishlist
• Expedite the check-out process
• Receive special updates and promotions
• Modify your account details at anytime 
• Check the status of orders
• Recording alternative addresses
• View past orders

These are basic services that most non-luxury sector ecommerce sites have been offering for years.  Luxury brands should do much better to create a more personalised and special online experience. 
For instance, once logged in I would expect a personalised experience wherever my web browsing takes me within the brand’s online world.  So my account should follow me around so that I do not need to log in/register again on different pages.  Of course, another benefit could be a personalisation of the content on each page based on my preferences (I have other ideas but wont give them out for free!).

For example, Gieves and Hawkes has a Corporate Blog on its site.  This is good but unfortunately, even though I was logged in on the main site, I would have had to enter my credentials again in order to leave a comment.   This lack of integration is not just about a lack of user friendliness, it does also highlight a lack of or poor multi-channels and multi-media CRM strategy.  In the luxury business, knowing your customers well and your customers to know you well is so vital for competitive advantage that it is starting to defy belief why luxury brands are following on the FMCG brands footsteps rather than lead the way.

Brands need an online social media strategy

Jeremiah Owyang  is right, a Brand should not “throw away” traffic on its corporate site by inviting visitors to join the Brand profile on Twitter or Facebook or other social site without a well thought strategy.  It is a bit like sales associates of a high street shop telling visitors on their way out: “We invite you to visit us at our small corners inside most department stores”.  This might seem to be sending the positive message “we’re present in these locations” but it might lead to the visitors buying at other Brands also located there as well as not coming back to the original store!  The same as sending a visitor of your Brand website to twitter where he/she will receive twits from many other Brands, is likely to lead to another Brand attracting more of his/her attention, and not have him/her visit your site again!

A Brand does typically spend much much more on its own website than on its social networks presence (if it has one) so if not careful, doing so might mean actually losing these visitors as potential active fan of the Brand, to become at best simple passive observers of some Brand-related activity.


However,  I am not convinced by Jeremiah’s matrix on the Evolution of Social Media Integration and Corporate Websites.  Or rather, I do not see it as a “must follow this path” for all Brands.  Let’s just take the last stage for example: “Complete integration between corporate site and social sites”.  I can think of most of the Brands in the luxury goods sector that would not benefit from such an integration.  This would lower the Brand name status too much to the level of just another network relation such as a friend on Facebook.  The Brand would risk losing its exclusive image, its capacity to generate and fulfill dreams.  Luxury Brands would need to maintain this image online and a complete integration with social media would make this difficult. 

Marci Ikeler from Publicis has a very good presentation on slideshare  “Digital strategies for luxury Brands”. 

Digital Strategies for Luxury Brands

View more presentations from Marci Ikeler.

She mentions the successful examples of Gucci on Facebook and MAC on twitter, both of which support the Brand image instead of “cheapening it”.  I noted this statement supporting Jeremiah’s first point: “The most successful luxury digital campaigns are fully integrated with a larger digital strategy and align with the brand’s values”.  But do not confuse this with a complete integration of the Brand’s website and social media!

You must read the chapter 10. Use digital to convey exclusivity (slides 43 to 45).  It shows 2 examples of exclusive social networking, illustrating why complete social mass media integration will not be beneficial for all Brands.

Enterprise 2.0 is not a game anymore, it's serious business

Another good post from Bertrand Duperrin following the Enterprise 2.0 Forum in Paris on March 17th/18th.

His bullet point list of conclusions is good news for everyone (like me) promoting the uptake of E.2.0.

I will highlight the following 4 points:

• It’s not a game anymore. Now projects are global and carried by the top management. That’s the end of social bubbles disconnected from reality. Companies think global and pilots are not made to test but are the learning stage before global rollout. I really appreciated Claire Flanagan’s approach that set a time limit (5 month) instead of limiting the number of users what allowed her to quickly get a critical mass (nearly 30 000 users) with an opt-in policy.
  
• Tools come second. We talked a lot about management, culture, governance. 90% speakers did not even mention the name of the platform they used and, in fact, the question is elsewhere (even than there’s always the same usual drudge in every conference). The best example comes from Danone where the “networking attitude” program was launched in 2003. It’s all about management and behaviors. Management 2.0 without web 2.0 tools. Tools came only when the behavioral dimension was natural in people every life in the workplace.
  
• There’s no “one size fits all” adoption model. Each company has to define its own way depending on its culture and on local cultures.
  
•  Support from top management. That’s been known for ages but it’s clear that a bottleneck appears when top managers are not active sponsors. I don’t mean being benevolent from a distance (”ok…let’s go guys…I’m watching you play..”) but being able to understand the change, make it theirs and imagine them, their staff and their behaviors in the future, be comfortable with it to be an active sponsor.

I (and many others) have been writing for years now about the importance of a strategic consideration, visible top management leadership, conducive corporate culture, adapted management behaviours and internal processes for the successful introduction of knowledge-sharing tools in an Organisation.  Looks like business leaders are finally getting the message.