The Customer is Here. Where are You?

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November 2013 • www.colloquy.com

TruaxisA MasterCard Company

MasterCard and the MasterCard Brand Mark are registered trademarks of MasterCard International Incorporated.© 2013 MasterCard. All rights reserved.

Getting customers to buy is easy

when you know how they spend.

ADVANCING LOYALTY ADVANCING COMMERCE

Find out how to reach more customers at truaxis.com.

Our transaction analytics helps see a true picture of consumer behavior.Truth is, the transaction data collected from participating financial institutions is the mostaccurate way to predict consumer preference. It’s at the heart of our loyalty platform, Truaxis,which uses industry-leading technology to deliver personalized rewards and money-saving offers to the debit and credit card customers of these financial institutions. Take advantage of this new channel to drive incremental business from your existing customers, and to help findnew ones – all in a cost-effective, turn-key solution. After all, it’s what’s inside that counts.

www.colloquy.com3

TruaxisA MasterCard Company

MasterCard and the MasterCard Brand Mark are registered trademarks of MasterCard International Incorporated.© 2013 MasterCard. All rights reserved.

Getting customers to buy is easy

when you know how they spend.

ADVANCING LOYALTY ADVANCING COMMERCE

Find out how to reach more customers at truaxis.com.

Our transaction analytics helps see a true picture of consumer behavior.Truth is, the transaction data collected from participating financial institutions is the mostaccurate way to predict consumer preference. It’s at the heart of our loyalty platform, Truaxis,which uses industry-leading technology to deliver personalized rewards and money-saving offers to the debit and credit card customers of these financial institutions. Take advantage of this new channel to drive incremental business from your existing customers, and to help findnew ones – all in a cost-effective, turn-key solution. After all, it’s what’s inside that counts.

Editor-in-Chief: Jill Z. McBrideEditor-at-Large: Dennis ArmbrusterSenior Writer & Editor: Lisa Biank FasigManaging Editor: Kate ShepherdStaff Writer: Caitlin WhitehurstResearch Director: Jeff BerryMarketing Specialist: Joan DenoWeb Editor: Josh MilnerMarketing Coordinator: Jeff Stoermer

Contributing Editors: Bryan Pearson, John Bartold, Stephanie Cohen, Lance Du Chateau, Kelly Hlavinka, Bruce Kerr, Mitch Martin, Graeme McVie, Dan Ribolzi, Brian Ross, Jim Sullivan, Fred Thompson

313 W. Fourth StreetCincinnati, OH 45202Telephone: +1.866.818.1151FAX: +1.513.231.0555Email: info@colloquy.comwww.colloquy.com

COLLOQUY® is a publishing, education and research practice that brings together more than 50,000 loyalty practitioners from around the world. The go-to resource for loyalty intel-ligence since 1990, COLLOQUY engages and educates loyalty marketers with its magazine, weekly e-newsletter, and timely and compre-hensive loyalty-marketing website, colloquy.com. COLLOQUY delivers industry-leading loyalty benchmarking reports and educa-tional workshops, webinars and speeches. The COLLOQUY Summit is the premiere annual loyalty event where innovative loyalty strategies worldwide are recognized with the COLLOQUY Loyalty Awards. Advertising, sponsorship and publishing opportunities are available via the COLLOQUY Network, a global partnership of loyalty service providers. COLLOQUY is an independently operated division of LoyaltyOne. To learn more, visit colloquy.com.

November 2013

The Customer is Here.Where are You?

Today’s all-powerful consumer, armed with a smart-phone, a tablet and an acute awareness of self-value, demands an all-powerful shopping experience.

16

84

6

12

27

10

FEATURE Story

GUEST Feature

Phot

o cr

edit:

Just

Jare

d

7 Ways to Cultivate “Monster Loyalty” Like Lady Gaga (Without a Meat Dress)

19 • RetailWhen Phones Become Stores, Macy’s StoresBecome Warehouses

22 • FinancialAt U.S. Bank, Omnichannel Delivers Hard Results Through Soft Rewards

24 • TravelFor Delta, Smooth Delivery is More Than Ancillary

26 • 5 Tips to Creating an Effective Omnichannel Program

& A

Editor’s Letter

Loyalty Landscape

Touchpoints

Parting Shots

www.colloquy.com4

strategies for delivering omni-channel experiences that increase engagement, and sales, while reducing inventory expenses.

The past year raised the bar for loyalty in many ways. New mobile technologies made it possible for consumers to identify product locations down to the aisle, and tablets enable us to order out-of-stock items or services in seconds. Yet the basics of what consumers want from the brands in which they interact have not changed – only the tools through which they interact have.

Whether consumers are flying, or-dering a food processor from their iPad or selecting music on their smart phone, they want the kinds of experiences that make them go gaga over a brand. That opportuni-ty is ours.

As we look back over the past year we should determine how we want those possibilities to define us moving forward.

Best of luck in your endeavors, and see you in 2014!

Dennis Armbruster, Editor-at-Large

EDITOR’S LetterWhat Orbitz, Omnichannel and

Lady Gaga Have in Common

By Dennis Armbruster

Monster opportunities. That is what 2013 brought forth in the form of new research, staggering innovations and intriguing impli-cations for loyalty.

Earlier this year, the COLLOQUY Loyalty Census reported a 27% uptick in loyalty programs in the United States since 2011, to 2.65 billion from 2.1 billion. Yet con-sumers are on average involved in less than half of the programs in which they are enrolled. This is a clarion call to loyalty marketers: The competitive field is thick with options, but the market is finite – and fickle. Getting consumers to sign up may be relatively easy, but maintaining your place in their wallets and imagination takes the kind of work and dedication that made Orbitz.com and Lady Gaga household names.

So we take our lessons directly from them, in a way. Our feature story, by Jackie Huba, author of the new book, “Monster Loyalty: How Lady Gaga Turns Followers into Fanatics,” shares seven lessons for building monster loyalty in any organization. Huba’s lessons are based on Lady Gaga’s own fan (and fanatical) engagement tech-niques. I can promise that it does not require wearing a meat dress.

Continuing our lessons on ex-tending loyalty to new horizons, the issue also includes a Q&A with Chris Orton, president of Orbitz.com, as well as the travel website’s vice president of loyal-ty, Lillian Murphy. They discuss the strategy behind the Oct. 21 launch of Orbitz Rewards and the lessons learned in the three-year process of creating and testing the program.

These are good examples of the many paths loyalty has taken over the years. In fact, one might say that, with 2.65 billion pro-grams out there, loyalty market-ing has become omnipresent. It only makes sense that it also is increasingly omnichannel.

In our cover story “The Custom-er is Here. Where are You?” we explore the latest endeavors in omnichannel communications and distribution in retail, finance and travel. With firsthand stories by Macy’s, Delta Air Lines and U.S. Bank, we share insider

“I can promise that it does not require wearing a meat dress.”

There’s nothing puzzling about why our loyalty solutions are so successful.

FIS™ Loyalty Services connect you with your customers in a meaningful way. Find out how our proven solutions can help you attract and retain customers that are profitable, loyal and the perfect fit for your organization.

Visit www.fisglobal.com/loyalty to request more information and enter to win an iMac®.

Rewards• Credit, debit and prepaid• Merchant-funded• Relationship• Retail• International• Education

Enhancements• Acquisition• Activation• Usage• Retention

© 2013 FIS and/or its subsidiaries. All Rights Reserved.

www.colloquy.com6

Loyalty program insights supply purchase data that help food retailers plan store layouts, and inform more e�ective merchandising and promotions.

Clean-up in Every Aisle.

Source: Data collected by Precima over a 52-week period. *Source: Food Marketing Institute 2011 **Source: USDA 2011 *** Source: Food Marketing Institute 2012

DAIRY

JUICE

LATIN

COOKIES

CEREAL

of customers who shop diapers also

shop yogurt.

95% 95%

of customers who shop single -

serve juices and drinks also shop nutrition bars.

86% 86%

90% of customers who shop single-serve juices and drinks

also shop cookies.

90%

57% 57% of customers who shop soy

beverages also shop hot cereal.

of customers who shop Mexican products also

shop tortilla and nacho chips.

83% 83%

Percentage of disposable income spent

on food **

5.7 % 5.7 %

Shelves are stocked with data. Merchants who implement loyalty programs have access to more and can better plan their store layouts to maximize pro�ts.

2.22.2 Average number

of trips to the supermarket per week ***

$27.30

$27.30 Average

transaction amount *

$27.30

LOYALTY Landscape

www.colloquy.com7

Freeosk Kiosk Dispenses DataBe honest, you’ve made a meal from a grocer’s free samples. Maybe you’ve even taken a sec-ond from an unsuspecting sample lady. A new kiosk sample dispenser might just ruin the fun.

Freeosk, described by Fast Company as the Redbox of free samples, features a scanner and high-definition touchscreen that lets customers collect free samples by swiping their loyalty cards. Companies gather data on who is sampling and purchasing their products, including registrations and profile information, geo-locations and Internet records, such as IP addresses and browser types.

In addition, companies can see if sampling the product changes the customer’s pur-chasing behavior. Both retailers and CPGs benefit in that they can measure and understand intent during the decision-making process.

Freeosk is available in select Sam’s Club stores and its creators envision it becoming an indispensible tool with other retailers, as well.

A Loyalty Program That Says ‘Let Them Eat Cake’

The British drink 60.2 billion cups of tea each year, accord-ing to the United Kingdom Tea Council. You have to figure that luxury retailer John Lewis took that number into account when cooking up its new loyalty program, “my John Lewis.”

The program rewards members with free tea and cake each month, fol- lowing a previous model set by sister-companyWaitrose. In addition to the tea and cake, members receive entry into regular prize drawings every time they shop, invitations to exclusive local events and VIP previews.

“We decided not to develop a scheme based on col-lecting points, and instead offer more immediate rewards, previews and events so that customers can experience the benefits of membership straight away,” said Chris Bates, head of customer marketing at John Lewis, in a press release.

Shoppers got their first tastes of the new program when it launched in October.

Virtual Reality Center LetsRetailers Test Loyalty Programs

A UK marketing firm has created a virtual reality center that lets retailers visualize in-store loyalty programs.

TCC spent millions of dollars on the Solution Creation Centre that features virtual reality technology from a local retail technology firm. The technology lets retailers build tailored loyalty programs and then view them from the shopper’s perspective.

The center will bring retailers’ ideas and loyalty pro-gram visions to life in an engaging way, said Michael Loakimides, CEO of TCC, in a press release.

Our friends across the pond have certainly gotten creative with this inter-active loyalty-planning tool – we’re interested to see if the move pays off.

www.colloquy.com8

Build community: Gaga knows that connecting One Percenters strengthens their bonds with one an-other and the business, so she built a social network for die-hard fans called Littlemonsters.com. Fans set up profiles, post fan art and photos, message one another and find links to concert dates. They even get their own Littlemonsters.com e-mail addresses, linking their online identities to Gaga. The pop star

is on the site weekly, posting special messages to fans, “liking” and commenting on their fan art and partici-pating in chat discussions.

7 Ways to Cultivate “Monster Loyalty”Like Lady Gaga (Without a Meat Dress)

By Jackie Huba

With 23 million albums sold, five Grammy Awards and Forbes’ distinction as one of the world’s most powerful celebrities, Lady Gaga is one of the most well-known pop artists in the world.

Yet while she is known as much for her voice as for her over-the-top wardrobe, Lady Gaga is less recognized for her stunning business acumen, which has given her legions of loyal fans worldwide – fans who are eager to buy her music, concert tickets and products. Her social networking prowess is off the charts with 40 million Twitter followers and 59 million “likes” on Facebook. Not only has she created a brand but she is cultivating a fanatical group of consumers, known as her “Little Monsters,” who will follow her for decades to come.

Lady Gaga didn’t become the success she is today based solely on her talent. She did so by engendering immense loyalty from her fans through her music, her message, and the community she has built around them. To anyone in the business community, this sounds like a classic case of loyalty marketing and customer cultivation.

How does she do it? Here are seven lessons for building this kind of loyalty in any organization (and they don’t include wearing a meat dress):

Focus on your One Percenters: Gaga spends most of her effort on just 1% of her audience, the highly engaged superfans who drive word of mouth. Despite her tens of millions

of social media followers, she focuses on the die-hard fans who make up a small but valuable part of the fan base. It’s these fans who will evangelize for her and bring new fans into the fold. Similarly, car manufacturer Mini knows that the best salespeople for the brand are its current customers. Much of its marketing is targeted at these customers vs. new customers. One example is “Mini Takes the States,” an annual 3,877-mile trek from New York to Los Angeles, where owners of the small car connect with one another through all things Mini.

1 Lead with values: Gaga differs from her con-temporaries by standing up for issues that she cares about and for sharing her values. She champions those in society who feel marginal-

ized and bullied for being different. Customers feel a deep emotional connection when they identify with your values or causes. Leading with values is not easy, but when done with integrity and commitment, customers will reward you with their loyalty. Green cleaning company Method was founded on the value of creating a “healthy home revolution” with prod-ucts that clean well but also are good for the environ-ment. Method customers share the same values as the company and will not switch to other cleaning brands that may be cheaper.

2

3

GUEST Feature

www.colloquy.com9

Give fans a name: Creating a name for your One Percenters, like Little Monsters, assigns them an identity. With that identity comes a set of recognizable behavioral or personal characteristics that everyone with that name shares. In essence, a name gives your fans something to join; to be part of. The simple act of referring to themselves by the name gives customers a strong sense of

belonging. Premium bourbon maker Maker’s Mark created a special program for its One Percenters called the Maker’s Mark Ambassadors. Ambassadors receive an array of benefits, from Maker’s branded business cards to invitations to Maker’s historic distillery in Loretto, Ky.

4

5 Embrace shared symbols: The use of symbols helps custom-ers bond by creating a

collective experience that only members of the community understand. Gaga uses many symbols with the Little Mon-sters, including the “paws up” hand signal. Even her iconic outfits and hairstyles are used by Gaga and Little Monsters to reference timeframes in her career.

Make them feel like rock stars: We may be taken for granted by our family or job, so when some-thing makes us feel special, we re-

member it forever and talk about it. When customers are made to feel special, they are more loyal. Gaga is an actual rock star but she makes her fans feel like rock stars, too. With the help of Verizon, for example, she will call a fan in the audience during her concerts and chat them up in front of the entire arena. She invites the first person in the line to get into the concert backstage to meet her and sign autographs.

Generate something to talk about: Gaga is the queen of word-of-mouth marketing. She

understands that you must continually give your One Percenters things to com-ment about so that they have reasons to talk to others about you. From popping out of an “egg” at the Gram-mys to lighting her piano on fire, she fans the flames of buzz and talk value.

6 7

Now that you’ve learned a lesson or two from Lady Gaga, ask yourself a few questions:

• Who are your One Percenters and are you giving them a chance to connect to one another and your company? • What are your company values or special causes, and have you shared those with your customers? • What do you call your loyal customers? • What are some symbols that your loyal customers have already created? • How can you be fans of your biggest fans? • What have you given your One Percenters to talk about lately?

So much more than a catchy verse, latex and lust, Lady Gaga can teach businesses how to lead with loyalty and gratitude.

Jackie Huba is the author of the new book, “Monster Loyalty: How Lady Gaga Turns Followers into Fanatics.” She is also the coauthor of two previous books on customer loyalty: “Creating Customer Evangelists: How Loyal Customers Become a Volunteer Sales Force” and “Citizen Marketers: When People are the Message.” Jackie coauthors the award-winning Church of the Customer blog, with more than 105,000 daily readers. A sought-after keynote speaker, her work has frequently been featured in the media, such as The Wall Street Journal, The New York Times, BusinessWeek, and Advertising Age. She is an 11-year veteran of IBM, a Pittsburgh Steelers fanatic and resides in Austin, Texas.

www.colloquy.com10

: How will you use the data collected through the program?

Murphy: Our goal is to open a dialogue with customers – we need to have data to make that happen. The data can drive the conversations. We also want to recognize customers for their loyalty to Orbitz and our intention is to incor-porate lots of surprise and delight.

& A Three years ago, Orbitz.com embarked on a journey that culminated in the October launch of its new loyalty program, Orbitz Rewards.

The program is free to join and customers earn and redeem Orbucks – the program's currency (one Orbuck equals $1) – when booking hotels, flights and vacation packages with Orbitz.com. In addition to providing instant rewards, the program’s benefits include no blackout dates and no restrictions on combin-ing rewards with other offers.

COLLOQUY reporter Caitlin Whitehurst spoke with the company’s president, Chris Orton, and its vice pres-ident of loyalty, Lillian Murphy, to dig deeper into the program, which already has hundreds of thousands of members. Following are paraphrased excerpts of the conversation.

COLLOQUY: When did Orbitz.com decide to pursue creating and implementing a loyalty program?

Orton: Orbitz started talking about a program three years ago when I was its chief marketing officer. The team agreed that we needed some-thing that was unique in the space and a true differentiator.

So we had a decision to make. Do we partner with someone and slap something together to check off a box, or do we really invest? Obviously, we chose the latter.

: What did you learn after talking with customers?

Orton: When we spoke with customers we learned two things. First, we found that points-based programs are often confusing for custom-ers, and Orbitz should strive to make the program more transparent and easy-to-understand. Sec-ond, we learned that customers often have trouble deciphering the value of programs. That’s why we made our rewards instant and achievable.

Girls G

etaway

GUYS

WEEKEND

Beach Vacat ion

Mobile Magic

Earn an extra 2% on hotels every

time you book on our app.

HOW IT WORKS:

3%+reward

savings

totalsavings

2%= 5%

mobilebonus

Double Dip Ocean

Book air on Orbitz and earn Orbucks

plus get your Frequent Flyer miles

and credit card points.

Frequent

Flyer Miles

Credit Card

Points

Orbucks

Rewards

$

Stack Hotel Deals

You can save even more by stacking

Orbucks on top of other deals such

as promo codes and sales.

Be a Travel Star

Become a Star or Superstar member:

4 Hotel nights12 Hotel nights

BENEFITS INCLUDE:

SUPER

STARBonus Beach

Join now and get these bonuses:

Your first bag

fee zapped

rewards

on flights

in our apps2x

+15% OFF

hotel deals

in rewards

on next flight$10

Referral Rapids

Share the travel love! Refer your

friends today and you’ll each receive

$25 towards future travel!

A FRIEND $25

YOU

BIG CITY

ADVENTURE

ART MUSEUM

SKITRIP

Free Breakfast

Hotel Upgrades

Concierge

Service

RewardsPromo Codes

Sales

$$$Tropical Hideaway

ARRIVEHOME!ARRIVEHOME!

and plan

your next tripand plan

your next trip

JOIN AT ORBITZ.COM/REWARDS

AND START

TRAVELING

JOIN AT ORBITZ.COM/REWARDS

AND START

TRAVELING

Booked hotel

on mobile and

earned extra

rewards

Move 3 spaces

Booked hotel

on mobile and

earned extra

rewards

Move 3 spaces

Booked

getaway for

friends and

earned all the

Orbucks

Move 4 spaces

Booked

getaway for

friends and

earned all the

Orbucks

Move 4 spaces

All-Inclusive

Retreat

FamilyVacation

HISTORIC

JOURNEY

WINE TOURRED

FOREIG

N

TOUR

�e game every traveler can win!

�e game every traveler can win!

JOIN ORBITZ REWARDS AND EARN EXTRA SAVINGS EVERY TIME YOU TRAVEL

Book your favorite hotels, airlines and vacation packages through Orbitz and win — you’ll get rewarded instantly.

Visit orbitz.com/rewards for full program details and terms.JOIN ORBITZ REWARDS AND EARN EXTRA SAVINGS EVERY TIME YOU TRAVEL

Book your favorite hotels, airlines and vacation packages through Orbitz and win — you’ll get rewarded instantly.

Visit orbitz.com/rewards for full program details and terms.

FACEBOOK.COM/ORBITZ

FACEBOOK.COM/ORBITZ

ORBITZ.COM/BLOGORBITZ.COM/BLOG

@ORBITZ@ORBITZ

Orbitz on RewardsTop executives at Orbitz share what went into Orbitz.com’s new

loyalty program that offers instant rewards.

www.colloquy.com11

Girls G

etaway

GUYS

WEEKEND

Beach Vacat ion

Mobile Magic

Earn an extra 2% on hotels every

time you book on our app.

HOW IT WORKS:

3%+reward

savings

totalsavings

2%= 5%

mobilebonus

Double Dip Ocean

Book air on Orbitz and earn Orbucks

plus get your Frequent Flyer miles

and credit card points.

Frequent

Flyer Miles

Credit Card

Points

Orbucks

Rewards

$

Stack Hotel Deals

You can save even more by stacking

Orbucks on top of other deals such

as promo codes and sales.

Be a Travel Star

Become a Star or Superstar member:

4 Hotel nights12 Hotel nights

BENEFITS INCLUDE:

SUPER

STARBonus Beach

Join now and get these bonuses:

Your first bag

fee zapped

rewards

on flights

in our apps2x

+15% OFF

hotel deals

in rewards

on next flight$10

Referral Rapids

Share the travel love! Refer your

friends today and you’ll each receive

$25 towards future travel!

A FRIEND $25

YOU

BIG CITY

ADVENTURE

ART MUSEUM

SKITRIP

Free Breakfast

Hotel Upgrades

Concierge

Service

RewardsPromo Codes

Sales

$$$Tropical Hideaway

ARRIVEHOME!ARRIVEHOME!

and plan

your next tripand plan

your next trip

JOIN AT ORBITZ.COM/REWARDS

AND START

TRAVELING

JOIN AT ORBITZ.COM/REWARDS

AND START

TRAVELING

Booked hotel

on mobile and

earned extra

rewards

Move 3 spaces

Booked hotel

on mobile and

earned extra

rewards

Move 3 spaces

Booked

getaway for

friends and

earned all the

Orbucks

Move 4 spaces

Booked

getaway for

friends and

earned all the

Orbucks

Move 4 spaces

All-Inclusive

Retreat

FamilyVacation

HISTORIC

JOURNEY

WINE TOURRED

FOREIG

N

TOUR

�e game every traveler can win!

�e game every traveler can win!

JOIN ORBITZ REWARDS AND EARN EXTRA SAVINGS EVERY TIME YOU TRAVEL

Book your favorite hotels, airlines and vacation packages through Orbitz and win — you’ll get rewarded instantly.

Visit orbitz.com/rewards for full program details and terms.JOIN ORBITZ REWARDS AND EARN EXTRA SAVINGS EVERY TIME YOU TRAVEL

Book your favorite hotels, airlines and vacation packages through Orbitz and win — you’ll get rewarded instantly.

Visit orbitz.com/rewards for full program details and terms.

FACEBOOK.COM/ORBITZ

FACEBOOK.COM/ORBITZ

ORBITZ.COM/BLOGORBITZ.COM/BLOG

@ORBITZ@ORBITZ

: Customers are increasingly seeking soft rewards; do you have anything planned in this area?

Murphy: Members who achieve SuperStar status – those who book more than 12 room nights in a calendar year – will have access to a full concierge service. And again, we have lots of surprise and delight planned.

: How have you gone about educating employees about the program?

Orton: We’ve discussed the program internally for more than one year. In February we walked em-ployees through program specifics to get everyone onboard and the program has really permeated our company culture. It’s not simply a hobby, it’s our day-to-day job. We’ve made it a sort of religion.

Every single one of our employees – from our offices in Chicago to our offices in India – was given Or-bucks sunglasses to celebrate the launch. The grape color has become a staple.

Murphy: It was also critical for the call centers to get behind the pro-gram, and they have. They’ve been waiting for a while to be able to offer extra perks to their custom-ers through the program.

: What about your business model gives Orbitz.com the ad-vantage in operating a loyalty program?

Orton: Orbitz has a strong brand affinity. This would obviously require research to substantiate, but I imagine we’re doing something that maybe our competitors wouldn’t be able to pull off.

Our commercial and marketing structures are able to support the integration of the program throughout all touch points.

www.colloquy.com12

Top 5 Reasons Shoppers Frequent a Store

Provides a good overall shopping experience

Has good sales and promotions

Has a compelling loyalty/rewards program

SALE

1

2

3

4

5

Offers a wide selection of products

Has a convenient location

TOUCH PointsWhen it Comes to Retail Branding,

Loyalty Must Step UpBy Fred Thompson

We all know that loyalty programs are popular with customers, but when it comes to why a customer shops with a particular brand, the loyalty program is actually fairly far down the list of reasons for why a customer engages.

A recent COLLOQUY survey of more than 3,000 consumers of the mass merchant, home improvement and personal electronics sectors indicates that loyalty programs are not core influencers of shopping behavior when com-pared with location, experience and customer service. The consumers ranked loyalty pro-

grams at the bottom of the list of shop-ping-decision criteria, including conve-nient location and knowledgeable staff. (See Figure 1.)

These numbers may be discouraging at first glance, especially to loyalty marketers, but we should not see them as a failing of loy-alty marketing as an engagement vehicle. A loyalty program cannot replace getting the basics right. In fact, this is a strong remind-er that loyalty marketing is most effective in capturing a customer who already finds

Figure 1

www.colloquy.com13

34% 30% 26% Consumer Electronics Home Improvement Mass Retail

Willingness to Forgive The percentage of customers who would forgive a retailer for a poor customer experience.

Source LoyaltyOne

value and utility from your brand. This should serve as a wake-up call on the need for programs to engage customers more deeply than through generic, oversimpli-fied earn-and-burn concepts.

Customers are still highly re-wards-and discount-oriented. About 75% of responders indicat-ed they are likely to preplan their shopping trips, and 50% report shopping around to get the best deal. The emphasis on value by consumers makes it tempting to deploy richer rewards components within a loyalty program as an ac-quisition strategy. And customers will respond – more than 40% of customers would be “very likely” to switch to a competitor if it of-fered a substantial incentive such as a $10 cash coupon on a $50 purchase – or a 20% discount.

But this approach will general-ly not retain customers, since these tactics are more likely to engender short-term “behav-ioral” loyalty, which is basically purchasing based on price, conve-nience or habit, but not on brand commitment. This leaves the

company vulnerable to competitors that could pull the customer away with an even deeper discount. More importantly, this approach does nothing to reinforce the true reasons a customer engages with a brand, and at worst, can distract from them.

What loyalty marketers should seek is emotional loyalty – loyalty to a brand that transcends convenience, habit, price (within reason) and situational constraints. The type of loyalty that compels customers to drive out of their way to shop with a particular brand.

Many programs attempt this through some common soft benefits, such as free shipping or a birthday thank-you. However, they fall short on introducing benefits that reinforce their brand’s distinctive qualities or at least addresses significant pain

points in their most valuable customer’s experience. The lack of differentiation is apparent in consumers’ attitudes toward re-tailers. A simple metric of “will-ingness to forgive a poor experi-ence” is shockingly low in these representative industries – on average, seven in 10 retail custom-ers said they would not forgive a poor experience. (See Figure 2.)

Given the variability of store expe-riences across many brands, this is highly concerning when you consider the number of annual visits and the likelihood that at one point everything will not go according to plan for a consumer.

A successful loyalty program needs something special, and this is where an initiative’s design and execution is crucial. We’ve known

Loyalty marketing is most effective in capturing a customer who already finds value and utility from your brand.

Figure 2

(Continued on next page.)

www.colloquy.com14

for years that programs that successfully blend hard rewards with soft rewards tend to deliver greater results and customer adoption. Here are three steps loyalty marketers can take to ensure their programs have a higher chance of resonating deeply with consumers:

Clarify the customers’ wants and needs: Loyalty programs need to engage consumers emotionally. Establishing which mechanism will accomplish this can be informed by the con-sumer data collected through the loyalty program and other channels. The data also will help the merchant to continually recognize what is relevant to customers, setting into motion a cycle of shared data and recognition. Frame these needs, and socialize broadly with the execu-tive team to galvanize the list.

Map the brand’s distinct qualities and customer experience pain points against your program benefits: Categorize what makes the brand unique and special, and develop a customer experience touch-map to ensure understanding of the good and the bad of interacting with the brand. Map the programs’ benefits against these two exercises and ask: are the benefits amplifying the brand and/or addressing customer needs?

Perform the “blind program” test: Lay out the benefits of the program on a sheet of paper, and then construct a quick list of the key competitors. Now, match the program structure to each competitor. Does it seem aligned to their brands as well? Score the program against each of the competitors’ brands based on brand fit. If the program has a series of high scores, the company hasn’t pushed it far enough to truly be a brand amplifier.

We don’t expect a loyalty program to be the main reason why a customer chooses to shop with you, but when it is well done, it can intensely amplify your brand. Other channels are addressing this call to action, and it’s now loyalty’s turn to step up.

Fred Thompson is a contributing editor at COLLOQUY.

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The Customer is Here. Where are You?Loyalty’s Seamless Role in Omnichannel Success

By Lisa Biank Fasig

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There was a time, back when stores had names like “Five and Dime,” when a custom-er purchase involved just one trip via one route. Today, thanks to the addition of “dot com” to most every company name, that trip can take as many as five routes, and most do not require leaving home.

But they do require as much attention to the experience as does a breathtaking window display, an upgraded airplane seat or a chocolate truffle on a hotel pillow. Today’s all-powerful consumer, armed with a smart-phone, a tablet and an acute awareness of self-value, demands an all-powerful shop-ping experience.

The answer to this demand, for a growing number of companies, is the delivery of a seamless customer experience across all channels and touch points; what is known as omnichannel. But more than mere practices, these omnipresent strategies are becoming a standard for leading companies, and a must for organizations that want to remain competitive.

“Companies that are able to do a good job at omnichannel are able to differentially attract the consumer, which is very import-ant – especially in the United States where the overall market is not growing greatly,” said Kurt Kendall, a retail strategist at the consulting firm Kurt Salmon, and an expert on omnichannel strategies. “It is critically important for their success.”

But giving consumers more choices, and ease, across the channels they choose re-quires a robust and flexible data system. Loyalty programs, through their ability to engage the consumer in dialogue and reli-ably capture his or her motivations, pref-erences and attitudes, play a pivotal role in building an omnichannel system that encourages increased brand interaction.

Retailers were the first to take notice. Macy’s Inc. made omnichannel fashionable by allowing consumers to order direct from a fulfillment center. A Nordstrom store in Salt Lake City includes 150 mobile point-of-sale-devices, and its direct-channel busi-ness (catalog, direct mail and Internet sales) continues to be one of its fastest-growing entities. And Sephora has introduced an online “pre-shopping product page” that displays real-time store inventory informa-tion, for shoppers who do not want to risk leaving empty-handed.

“In a digital world we talk about digital con-nections – online or mobile – using cookies. But the problem is you cannot connect online and offline activity with a cookie,” said Brian Ross, president of Precima, a LoyaltyOne analytics solution. “A loyalty card can connect those elements.”

Today omnichannel strategies are no longer limited to retail. Organizations in many industries, including finance and trav-el, have picked up on the need not only to be available wherever the consumer is standing, but also to have an integrated understanding of what is happening across channels.

The reasons are walk-ing in, and out, of shop fronts each day. Almost 50% of home shoppers consult at least three channels before buying a prod-uct, according to a 2012 analysis by the research groups Conlu-mino and Webloyalty. That compares with less than 14% in 2002. Yet only 29% of cus-tomers COLLOQUY surveyed in June said they expect a merchant will have the product they need when they go to the store.

Almost 50% of home shoppers consult at least three channels before buying a product.

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simultaneous expectation to seamlessly deal with the company through all of these channels when and how they choose based on personal needs, timing and mindset. This is where loyalty programs, and the data they collect, play a key role in encour-aging increased brand interaction. As Ross pointed out, loyalty programs serve as a unique identifier that can follow a con-sumer’s purchase behavior across all touch points.

They also generate the data to understand the full consumer experience, from the ad-vertisements customers see to the channel they shop, said Seth Sarelson, chief oper-ating officer and co-founder of RevTrax, a marketing technology company that helps brands maximize in-store sales through digital coupons and offers.

“The loyalty data really shows preferences and allows for personalization across every step of the consumer experience,” Sarelson said. “The key is leveraging the data that exists to effectively market to the consumer and drive whatever their goals are. It’s all about personalization and convenience, that is what it comes down to – the person-alization is relevant.”

Following are analyses of omnichannel communication and distribution strategies, and the role loyalty plays, across three ma-jor industries: retail, financial and travel.

That is a lot of lost sales. It is no surprise that almost 83% of executives said they intend to invest in omnichannel strategies in the near future, according to a 2013 survey of 120 senior executives by the Winterberry Group and Interactive Advertising Bureau.

Omnichannel strategies work because they focus not on the delivery or communica-tions channel, but on the customers who use them, enabling them to move easily from stores or bank branches to the web or a mobile app. In many ways, omnichannel is the logical evolution of multi-channel; tak-

ing the many purchase opportunities present-ed to consumers and interweaving them so each channel is aware of what is happening with the other.

And like all evolutions, it occurred in phases. First, companies built

new capabilities among specific channels, from bank branches to online banking, showrooms to direct-order kiosks, and airline travel agents to mobile apps. Then, in the last several years, the barriers between the channels have come down, allowing customers to engage with a brand through whichever method they chose. The chal-lenge, as consumers increasingly adapt to multiple channels, is that they have the

Loyalty programs serve as a unique identifier that can

follow a consumer’s purchase behavior

across all touch points.

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have the desired size or color. In addition, it has set up four ideally situated “mega” fulfill-ment centers in Portland, Tenn.; San Antonia, Texas; Goodyear,

Ariz.; Martinsburg, W.Va.; and Cheshire, Conn. If a shopper in Los Angeles wants a Michael Kors cutout dress in red, but it only comes in her size in black,

she can use the store kiosk to order one from say, New York. If the order is more than $50, it’s shipped for free.

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Some merchants define their best shoppers as the highest spenders, others as those with the great-est down-the-road potential. At Macy’s Inc., the best customers are those who come from all angles.

“The consumer loud and clear has told us that we need to be pre-pared to let her shop whenever and wherever and however she wants to shop,” said Jim Sluzewski, senior vice president of corporate communications at the depart-ment store chain. “We know that it has been true for some time, that customers are shopping both online and in stores, and our best customers are those who shop both ways.”

RETAILWhen Phones Become Stores, Macy’s Stores Become Warehouses

Increasingly this has lead to shop-ping via mobile or tablets, order-ing shoes at the breakfast table, a tie during happy hour or actually browsing the store during lunch but making the purchase while on the couch that night.

In response, Macy’s has built an omnichannel strategy that creates a seamless experience across all of these channels and, importantly, makes all inventory available to every customer – no matter how they shop.

To date, Macy’s has established 500 “fulfillment stores” that serve as mini warehouses, feeding goods to other stores that may not

To date, Macy’s has established 500 “fulfillment stores” that serve as mini warehouses.

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(Continued from page 19.)

Or say the desired product is some-thing a particular store does not sell at all, like a KitchenAid mixer in the color boysenberry. Another store in a different state may carry that color, or it can be shipped direct-ly from the warehouse. Similarly, if the shopper makes a purchase on macys.com, that order may be fulfilled from a store or a traditional warehouse. The consumer doesn’t necessarily know this, but why should she care?

What the customer cares about is getting what she came for and enjoying the experience. Almost one-third of consumers rate the ability to reserve specific products on merchant’s website, to be picked

up at the store within five days, as “very appealing” according to an April 2013 survey of 1,096 con-sumers by LoyaltyOne.

The information consumers share through their loyalty programs can enhance such purchasing options, said Brian Ross, president of Precima, a LoyaltyOne analytics solution. If the shopper seeks dif-ferent items in-store than she does online or on mobile, a merchant

can use the data to identify what is most relevant to that customer in a particular channel.

“Many organizations have an in-store or web or mobile strategy.

But they should have a customer strategy first,” Ross said. “The question isn't, ‘What do we want on the web.’ You have to look at it first from strategy of how the cus-tomer wants to interact with each of these channels.”

Done right, such knowledge enables merchants to get the most mileage from their national inventories. The trick is drilling into the loyalty data to effectively segment consumers, said Seth Sar-elson, chief operating officer and co-founder of RevTrax, a market-ing technology company. The loy-alty data can reveal sub-segment insights, such as the color prefer-ences of Floridians compared with Kansas shoppers, and this can help retailers find ways to inspire them to spend a little more.

“Through a loyalty program they can give them a compelling offer, and they are able to act on that across multiple channels,” Sarelson said. “The consumer should be able to engage at any register and at any device.”

Which is what Macy’s, and oth-ers, strive for. Sluzewski would not specify just how much Macy’s omnichannel strategy has en-hanced sales, but he did point out that the company has reported 15 consecutive quarters of net income growth, which correlates with the implementation of the omnichan-nel strategy back in 2009. The point: No matter the channel, the customer exists in one place for the merchant – at the center of its decisions.

Lisa Biank Fasig is a senior writer and editor of COLLOQUY.

Source: macys.com

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FINANCIALAt U.S. Bank, Omnichannel Delivers Hard Results Through Soft Rewards

A bank and a James Beard chef may not have a lot in common, but they can have a common cus-tomer. Bringing them all together, however, could take a warehouse of data and a team of thousands.

This is what U.S. Bank has com-mitted to in promoting and deliv-ering relevant reward experiences to its multi-channel customers. Digging into the data from its FlexPerks Rewards program, the Minneapolis-based bank identified two emerging prefer-ences among its customers: an increased desire for soft benefits, such as a trip to the driving range with a golf pro or to meet a James Beard award-winning chef; and

second, a desire for more mobile and social communications.

But being a financial services institution with a vast portfolio of services and customers, U.S. Bank knew it had to equally maintain all of its channels, from call cen-ters to suburban retail stores and to mobile apps. It relies heavily on its FlexPerks data to identify which kinds of experiences its customers prefer, and then how to alert them of the opportunity.

But that isn’t such a straightfor-ward task, since not all consum-ers share their preferences. Some, for example, may not indicate their engagement preferences, so

U.S. Bank might need to assess through their activities whether they prefer a human being (by regularly calling a call center) or an interactive website, said Bob Daly, senior vice president of FlexPerks Re-wards and loyalty management at U.S. Bank. In fact, Daly has been known to directly phone customers who first contacted the call center.

“We take those learnings and integrate them into subsequent communications, so that cus-tomers walk away thinking, ‘Hey, that brand knows me,’ ” Daly said. “And the bar is pretty high today, so it’s a challenge.”

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It is a challenge worth taking. An affluent customer who promotes a bank can deliver an accumu-lative effect of $10,000 more in value over his or her lifetime than a customer who is a detrac-tor, according to a 2012 report by Bain & Co. Inc.

The omnichannel customer experience presents such oppor-tunities for promotion, through strategies that target the cus-tomer’s motivations, said Peter Wilton, who teaches strategy and marketing at the Haas School of Business, University of Califor-nia, Berkeley. But, he added, the data makes it possible.

“In financial services, most prod-ucts are highly commoditized or quickly imitated,” Wilton said in an email. “To achieve sustainable differentiation, the firm needs to deliver an intangible experience that leverages intimate knowl-edge of the unique loyalty trig-gers for each attractive customer.”

U.S. Bank carefully ensures that its event messaging is relevant but experientially consistent. A single event may produce pro-motional websites, variable direct mailings and emails. Thousands of customer service advisors are trained to know certain groups of customers may be invited to an event. To ensure a consistent voice, U.S. Bank’s online and call center employees, as well as its printed mail team, work together. That said, most of the orchestra-tion occurs within the product

group to assure that, regardless of channel, a common message, branding and theme exists.

At the same time, the bank is drawing new insights from the data everyday, Daly said, by examining the retention rates of customers who attend events and gauging whether their spending and transaction be-haviors increase.

The strategy has delivered results. U.S. Bank has seen an 8% lift in retention among attendees of its events and a 6% lift among those who have been invited. Attendees also increased their spending on the FlexPerks card by 12% just 30 days after an event.

Encouraged by these results, U.S. Bank has begun to collaborate with other areas of the bank in hosting events. A recent dinner organized with its wealth man-agement group included a five-course meal and wine pairing for $45. It sold out in six hours.

“We retain those cardholders at better rates and we see a lift in their behaviors and they refer

other cardholders in greater num-bers as well,” Daly said. “They are just pulling it out of their wallets more frequently.”

In an industry often viewed as highly commoditized, creating a consistent omnichannel experi-ence extends beyond the event and into everyday use, even when the promotion isn’t tied to each swipe of a card.

Lisa Biank Fasig is a senior writer and editor of COLLOQUY.

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TRAVELWhen it comes to extend-ing their services seamlessly across all new channels, air-lines cannot afford to leave anything up in the air.

It’s a theory grounded in fact. Two in three U.S. online leisure travelers own a smartphone, according to Hudson Crossing, a stra-tegic advisory firm. By the end of 2018, it anticipates that 91% of U.S. travelers will own a smartphone and 89% will own a tablet. Those consumers will ex-pect to be able to purchase any airline service from that device, from round-trip tickets to the little extras, such as priority boarding.

So Delta Air Lines is using its loyalty data not simply to communicate its exist-ing services easily across channels. It also is using the data to develop new ancil-lary services to promote through them.

“One of our objectives is to ensure consumers have control of the entire travel experience across all touch points,” said Cheryl Scheck, director of ancil-lary revenue at Delta Air Lines. “We know we have a lot of great data on our customers in terms

For Delta, Smooth Delivery is More Than Ancillary

of who they are and their travel patterns, and that helps us develop what products are of value to them whenever and wherever they are.”

Delta’s challenge, as is the chal-lenge of all organizations, is to deliver across channels in ways

that translate to seamless brand experiences for those customers who jump from one device to another. Multi-channel strategies simply reach a range of airline cus-tomers across different segments, but unless these channels work col-laboratively, they do not guarantee

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For Delta, Smooth Delivery is More Than Ancillary

– my phone,” he said. “If you can't book easily and seamlessly with your iPhone in three years you’re not going to be in the game.”

Delta’s Scheck agreed, describing both service development and de-livery as an “interactive process.”

“Our objective is to really sell these ancillary products across any chan-nel that can sell a ticket, ultimately,” she said.

consistent experiences. Book-ing a flight on an app may be a completely different process than booking online, for instance.

So in January 2013, Delta com-pleted the first phase of a $140 million investment in multiple technology platforms, includ-ing mobile, kiosks and online at delta.com. Separately, the carrier employs a team of prod-uct managers who are synced by product and channel, and who team up with those in the organization who manage the customer experience.

Among Delta’s efforts: it has ex-tended the purchase availability of its economy comfort seating across all channels, from online to digital apps to airport kiosks. Several other ancillary services, including priority boarding, mileage booster and the 24-hour Wi-Fi pass, are available at delta.com or through the Fly Delta app. Priority boarding and one-day passes to the Delta Sky Club also can be purchased at an airport kiosk.

And, most recently, Delta intro-duced its Smart Travel Pack, a package of the top five most-requested offerings by Delta customers, including checked bags, priority boarding and seat selection. The first such product of its kind, Delta is offering the pack on its website through Jan. 5, at which time it will review customer feedback and make the

Lisa Biank Fasig is a senior writer and editor of COLLOQUY.

needed adjustments in both service elements and availability. But chances are such services, if consumers want them, will need to be easily available by phone or tablet, as well as computer or kiosk, said Michael Boyd, president of the Boyd Group International, an aviation consultancy in Ever-green, Colo. Omnichannel, he said, is “critical” for the airline business.

“The name of the game is having an app so I can make a reservation with my phone – not my computer

Delta’s Smart Travel Pack offers a variety of perks accessible digitally.

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Put your data to work:Loyalty data provides a snapshot of what the customer is doing across all channels, online and off-line, and across all geographies. By grouping the data in segments and sub-segments, marketers can identify regional, cultural and life-stage preferences.

Focus on the customer, not the channel: Rather than create separate mobile, online or in-store strategies, organizations should create a single customer strategy that is consistent. The same customer may purchase different products from each channel, but may still have the same experience preferences.

Integrate your teams: It sounds elementary, but in many cases the people making omnichannel decisions are senior-level executives who do not understand all channels. Bring the social media, loyalty and IT teams together with chief marketers and strive for a single-view of the customer. Trade-offs should be by customer segment, not by balancing budgets across channel ownership.

Create relevance all the time: Digital channels have conditioned consumers to expect to find what is relevant to them, wherever and whenever. Even when the shopper is not in a physical location, she is constantly engaging with a brand, so the brand must focus on maintaining relevance at all times.

Prepare for more: The most successful organizations traditionally have been those that not only embrace change, but also spearhead it. A successful omnichannel strategy should be the launch point, generating insights to further elevate brand credibility.

5 TIPSto creating an effective omnichannel program:

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PARTING ShotsWhat are some simple, affordable ways companies

can reward customer loyalty?

Finish this sentence: Companies looking to axe their loyalty programs should...

@LoyaltyCIO: birthday recognition messages bearing truly valu-able “gifts” are an all-time favorite and they are effective!

@morleyivers: also consider a partnership approach of adopting a currency that they know their customers would enjoy earning.

@barrykirk: ask themselves: What other marketing strategy comes close to the ROI of the one that retains our most profitable customers?

@nicki_powers: consider a targeted com-munications strategy first.

@LoyaltyTruth: carefully con-sider all options and outcomes while engaging an indepen-dent voice to help make the best decision.

@ifeelgoodsinc: should keep calm and delight their customers with digital rewards!

@derekfaylor: should invest in improving the customer experience. True loyalty isn’t developed by points or re-wards. Exceed expectations!

@URPRIZE_NET: In my years of servicing the Hispanic com-munity, always addressing them by their first name (it’s an old cliché) but it still works.

If you want to join the conversation, you can do so at @colloquy #LoyaltyTalks.

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