Anyone who tuned in to ABC’s Wide World of Sports in 1982 may have witnessed one of the most compelling athletic events of all time. Julie Moss was leading the Hawaii Ironman and closing in on the finish line when she became crippled with exhaustion and dehydration. She collapsed to the ground, losing her lead to eventual winner Kathleen McCartney, but refused to quit. In personification of human determination, she crawled to the finish line on her hands and knees.

Viewers were bipolar in their reaction to Julie’s effort. Some were inspired to complete an Ironman, etching it into their “bucket list”. Others dismissed the whole scene as crazy, unrealistic, fringe behavior at best.

Well, the Fringe has become Mainstream. Membership in USA Triathlon, the sport’s governing body in the U.S. soared above 100,000 members in 2007. The granddaddy of US Ironman events, Ironman USA, sold out the 2009 race the day after this year’s event, meaning that about 2,200 “fringe” athletes dropped over $400 each to reserve a spot in next year’s race in Lake Placid, New York.

Why should Loyalty Truth, or You, care? In one word – Brand! The Ironman brand has become one of the most recognized in the world and represents a valuable constituency with more than 50% of its members earning over $100K.

That a truly fringe event conceived by a bunch of unrelenting jocks in Hawaii could evolve into a global brand is remarkable. Considering that anyone wishing to associate with the brand through competition in one of the growing number of events around the world is more incredible as you can’t join the “club” without suffering through 140.6 miles of swim, bike, and run in one very long day.

The brand has been vigorously licensed by its owners to makers of automobiles, watches, clothing, sunglasses, and financial services providers. Major companies including Ford, Timex, Dell, Aflac, and Janus have associated their own valuable brands in partnership with Ironman.

If you want to see world class brand delivery and reinforcement in action, seek out an Ironman event and wander around the race site. You’ll sense the magnetism of the event and, if you are a brand manager or owner, you’ll walk away asking yourself how you can do the same with yours.

Bridging the gap from Fringe to Mainstream has been critical to increasing the power of the Ironman brand. Rather than insulate non-competitors from the experience, Ironman has worked hard to create a lifestyle message that anyone with dreams and aspirations can share.

“Anything is Possible” is the current tagline and judging from the growth of the brand itself, I would have to heartily agree.

My earlier post, “Finding a cure to digital myopia” offered the thought that while people are consumed with keeping the pace with the introduction of new applications synonymous with Web 2.0, we stand in danger of missing the bigger picture.

The offline version of the same story started in the late 70’s when during the first gas crisis in the US, consumers learned how to pump their own fuel. In the name of cost and time savings, consumers embarked on an era of self-service that continues today.

Low cost delivery of customer support services was first made possible by automated voice response systems (IVR) and got better with web based applications. In the midst of all this “progress”, consumers nearly lost the ability to speak to a human being if that was their preference.  Try finding the “cancel account” contact information on web based services like Vonage for instance and you’ll see what I mean. Like it or not, you’re forced to go on a digital treasure hunt that does not pay off consistently.

Over the past few years, we’ve also learned to swipe a credit card, enter a pin, and check out our own groceries, office supplies and home improvement goodies. It seems that every step of progress we take to save time and move more quickly through a line comes with a learning curve.

George Carlin captured out plight in one of his NEW RULES FOR 2008 “I’m not the cashier!  By the time I look up from sliding my card, entering My PIN number, pressing  ‘Enter,’ verifying the amount, deciding, no, I don’t want Cash back, and pressing ‘Enter’ again, the kid who is supposed to be ringing me up is standing there eating my Almond Joy.”  I would only add, “Why do I have to pay full price when I am doing part of your work?”

Flying on JetBlue recently, the announcement was made that the airline had gone to a “cashless cabin” meaning that only plastic could be used to pay for drinks and sandwiches. We were also encouraged to participate in cleaning up cabin trash as a means to “keep air fares as low as possible.” Interesting how the airline has reduced consumer choice and shifted responsibility while spinning it like a step towards air travel nirvana.

How far our new self service society will progress is up for debate. I have been used to helping myself around most big box stores for a while as store associates are not only scarce but lightly trained. I can tell you that I don’t want to make my own sub at Quiznos or have to start checking stock on shoes at Sports Authority.

Owners of businesses that are high touch and offer personalized service should be encouraged. The more retailers shift their daily chores to customers, the greater the backlash by those hungering to be treated with some TLC.

The 64 dollar question is what motivates this trend in the first place. Retailers are pressed by operating costs and plagued by high employee turnover. Shifting tasks essential to the shopping experience to the customer helps with both issues, but does it serve consumer needs?  A by-product of the new paradigm will be less need for trained associates while the ones that remain are, by definition, less valued by the retailer. Bottom line: the longer this trend continues, the more frustrating the shopping experience will become.

Businesses that craft their in-store experience based on what consumers want will increasingly stand out from the crowd. Personal service is always in style and knowledgeable staff makes the shopping visit something to remember.

Consumers should step back from their silent acceptance of this self-service avalanche and ask themselves if they like the purchase experience better today or 5 years ago. Businesses should have a finely tuned ear poised to capture the responses and make changes in their front lines to recognize what consumers really want. The good listeners will benefit from higher store traffic, more sales, and highly satisfied customers.  >>>>  Bill Hanifin

Being a player in our new digital age is akin to being the catcher in a knife throwing act at the county fair. It’s exciting, and cool that you can keep up the pace, but will the end game work out in your favor?

Both games are fast paced and just a little dangerous. The pace of introduction of new web based applications, communities, and services never seems to let up and the merit badge of those “in the know” is expressed by their ability to dissect the latest phenom, master it, and then declare it nearly passé as they go on all night vigil waiting to coin the next great thing. The danger in playing is not physical, so you can relax on that count. The risk is that while we are chasing the rabbit in this blistering race, we can easily lose sight of why we are running so hard.

The rapid progression of Web 2.0 offerings MySpace, Facebook, You Tube, and Twitter are example enough. According to Business Week, the most well known social network in 2005 was Friendster. With multiple generations of social networking in play, it’s safe to say things have changed.

Marc Andreessen, of Mosaic and Netscape fame, is behind Ning, a platform that allows people to make up their own mini-MySpace. Speculation abounds that instead of one of the established social networking platforms dominating an industry consolidation, there may be a big bang in our digital future with the resulting fragmentation translating into everyone having their own micro-mini network.

While I do hear people asking questions about how this will play out, I don’t hear them asking the important question – what tangible benefits do I get from social networking and how much time do I have for it? In short, we should be looking for the drivers of desirable behaviors, rather than “twittering” about which glob of mud thrown against the wall will still be worth our time in two years.

For the majority of the connected population that still finds sleep useful, decisions will be made of how best to allocate our digital mind space. Life online still has competition with TV, music, movies, meals, work, and families. While it’s fun to have a profile on LinkedIn and pages on MySpace and Facebook, we will eventually make choices as to where we get the most benefit from time invested and pare down the number of engagements we maintain online.

Don’t misinterpret my take here. Social networking is an awesome concept and has benefits for its participants. I just find it interesting that the web started off with bulletin boards and forums and now envision that we could return full circle to an environment where people match up with others on increasingly granular subject matter. Where the commercial benefit resides is not yet clear, but so far it looks like the participants stand to receive greater benefit as they can short-cut rolodex networks and bring efficiency to their business and personal lives.

It may be that the next great thing will be found in the madness itself.

Just like Executive Book Summaries, which offers summaries of business books to save time and money for their subscribers, maybe a clearinghouse application that aggregates and filters multiple networked memberships will constitute the most hip home page that you can add to your browser.

Or, maybe it’s already out there and I just haven’t had the time to find it! >>> Bill Hanifin

Having a well planned and executed Customer Strategy should be the litmus test for the efficacy of today’s corporate marketing department. Think you can live without it? Then ask yourself why companies are putting more choice in consumer hands each day and striving to gain perspective on customer preferences via blogs and communities.

Whether a Loyalty program should be part of the Customer Strategy is continually up for debate. My old friends at Colloquy have long postulated that “Loyalty is a tie breaker”, citing distinct circumstances that loyalty can and cannot influence. The assumption is that industries which are highly competitive and are approaching commoditization can leverage a loyalty program to their advantage. Caution is encouraged as shortfalls in brand image, product or service quality, pricing, or even physical coverage of a geographic area will limit the impact of even the most compelling loyalty program.

I have been studying loyalty programs across vertical industries and have a pending research paper which will outline a new set of best practices for the business. Look out for the related white paper, coming soon. In the meantime, I had to share my experience with two big box retailers illustrating how pricing anomalies can constitute one of those hurdles that even a well done rewards program cannot clear.

A simple home project caused me to seek out a 25 foot section of CAT5e networking cable. Since I needed to buy some office supplies and like Worklife Rewards, I headed into Office Depot to knock off my to-do list. There I found two choices of cable, with Gray or Blue being my color choices. The $31.99 price point seemed high, but I trusted ODI to be true to their big box origins and tossed the cable into my cart.

The need for some way to neatly attach the cable to the wall led me to Home Depot as nothing of the sort was available at ODI. Within 30 minutes I was staring at the clips I needed and, OMG, the exact cable just purchased at a price of $14.98. Not only could I save big bucks, but the cable came in white, a much better choice for my application.

Giving Office Depot the benefit of the doubt, I hope that I stumbled onto a true exception. I can understand price variances on individual items within a reasonable range, but this was a shocker. I left with the suspicion that ODI must provide certain items as “convenience purchases” to their shoppers and exacts a premium price in return.

Whatever the explanation for this huge price differential, this was an un-welcome wakeup call to a loyal customer. I felt betrayed. Where Worklife Rewards had lulled me into a willingness to give the chain a broad share of my home and office spend, I now was wondering how much those points were really costing me.

All things being equal, Loyalty programs are supposed to break the tie. They are intended to redirect consumer attention from price to free program benefits. My experience snapped me out of my loyalty trance and rerouted my brain to more carefully evaluate pricing of any significant item. More importantly, my confidence in taking a relaxed approach to shopping in this store was shaken.

Transparency and trust are two essential elements of building long term loyalty. I hope that these items are not “discontinued merchandise” at Office Depot but only “temporarily out of stock” >>>> Bill Hanifin

“While not every business needs a loyalty or rewards program, every business does need a thoughtfully created and well executed Customer Strategy.” This snippet of dogma clipped from the Customer Growth LLC site is backed up by many examples in the marketplace. It emphasizes the importance of forming marketing strategy with your customer’s best interests at heart, and only then creating tactics for execution.

For years, Walmart has drawn the attention of every loyalty marketing business development executive who can fog a mirror, each pledging to “be the one” to convince the retailing behemoth that giving away points will drive customer loyalty. To date, Walmart has perfected the art of playing hard-to-get better than any prom queen in history.

You see, Walmart already has a loyalty program in place – it’s called the business model. Beginning with “Always Low Prices” and evolving to “Save money. Live better”, Walmart is all about optimizing its supply chain and delivering the benefits of low prices to its customers. The company website (www.walmart.com) even has a counter to show the “amount of money Wal-Mart saved American families since Jan. 1, 2008.” The graphic below was taken May 18, 2008 at 12:15pm ET. Check it again when you read this article and see how much the number has grown! Note: it is tiny, please click on it to enlarge it!

Tapping an example from the local retail market, every cyclist and triathlete depends heavily on their LBS, otherwise known as the Local Bike Shop. I don’t know the origins of the LBS descriptor and I’ve never heard of a Global, National, or Regional bike shop. Just take it to mean that LBS equates to your good old neighborhood bike shop where you place your trust for all your cycling needs.

For years, I frequented a shop that had a lot going for it. A convenient location, wide selection of product, and word of mouth recommendation from friends made it a no-brainer to be my LBS. Too bad that nearly every time I walked through the door I was greeted by “Need a new bike?” I am sure the owner treated this as a throw-away line of little consequence, but it just wore me down. Most people keep their bikes for years, not months, at a time and depend on the LBS for parts, service, and clothing in the meantime. In weak moments when I responded to the standard question by asking “what’s new?” the owner would point me toward the latest bike he had in stock. According to him, nearly everything in his inventory was perfect for me.

Numbed by the continual barrage of sales pitches, I visited a few competitors. My search landed me in a shop that didn’t even carry finished bikes. In fact they won’t sell you a bike without first measuring you on a test machine and then recommending a short list of frames that are compatible with your anatomical dimensions. I had suits tailored to fit before, but never a bike. The business model at the Racer’s Edge (www.theracersedge.net/) is optimal for any serious cyclist. Not only did I get the message that my interests came first, but the process of being fit to the right bike created a level of trust and respect for the staff that could not be replaced with a points program, no matter how good the offer.

It should be clear by now that winning and retaining customers can result from adoption of a unique business model that emphasizes price, service, quality as well as other factors. The finer distinction to make is that regardless of whether your business adopts a traditional loyalty program to reward customers, there is always value in collecting and leveraging customer data in order to improve the in-store experience and the economics of marketing spend.

In both of the examples cited here, there is room for improvement.

• With Walmart’s dedication to a low price strategy, it might be difficult to craft the mechanism to begin the collection of individual customer data and match it to transactions. It’s tough to pull off without creating some type of “club” and Walmart is likely to stick to its one-to-many philosophy.
• For high service, high touch businesses such as my favorite LBS, collecting customer data and preferences is much easier to embrace and the investment in such efforts is guaranteed to pay off handsomely.

Building a Customer Strategy for long term success is inextricably linked to your business model, brand, and objectives. Determining a strategy before applying tactics is the key to victory. To quote the military strategist, Sun Tzu, Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat”.

… Bill Hanifin

A Loyalty program can be to a retailer as snakeskin is to a reptile. The program is an external manifestation of the retailer’s identity (in this case, brand) which must evolve in response to growth and change within its environment (the business).

The analogy is intriguing but has limitations. Snakes shed their skin up to four times per year without having any say in the matter. Nature knows when refreshment is necessary and a new skin allows for growth as well as purging of parasites from the outer layer of the reptile. Not conforming to this pattern, retailers have been known to launch loyalty programs and leave them unattended for years.

Secondly, when a snake moults its skin, a new one is always created. There is no choice in the matter and the new skin is normally bigger, brighter, and moist with brilliance. The fate of a retailer’s loyalty program lies in the hands of the reigning executive team. Corporate acquisition, new directions in brand identity, or fundamental changes in the competitive landscape impact the perceived usefulness of the loyalty program and threatens its future existence.

The manner in which retailers or any customer facing organization manage changes to their loyalty programs has direct impact on their customer base. If you are tempted to think that loyalty doesn’t matter or that program saturation translates to consumer apathy, take note of the massive volume of emails received by the airlines each time they change their program rules. Believe me, consumers are paying attention.

Vitamin Shoppe doesn’t sell snakes or snake oil but caught my attention by the way they handled a tricky circumstance relating to their loyalty program. The company recently acquired Nutrition Depot, a homey chain of health food stores that had earned a strong following. As part of the purchase, Vitamin Shoppe inherited an existing rewards program and needed to manage customer expectations with care.

In Nutrition Depot’s VIP Rewards, customers could earn 1 point for every dollar spent in the store and received money off purchases when reaching specific thresholds. Point balances were reflected on purchase receipts and redemptions were transacted seamlessly at the point of sale. No website was needed for support and program communications were minimal. This very basic frequency program awarded regular shoppers and capitalized on POS messaging to keep expenses low.

As local stores were shuttered and “coming soon” signs were posted, customers raised questions on several fronts. Would loyal Nutrition Depot customers identify with the slicker, corporate feel of the Vitamin Shoppe stores? Would prices increase to support national advertising? How would Vitamin Shoppe handle point balances from VIP Rewards?

The company took a big first step in helping customers find the right answers to these questions through their intelligent and caring communications regarding their own loyalty program, Healthy Awards Club. A Welcome letter was sent to all customers in the Nutrition Depot program informing them of the acquisition and pointing out benefits of the Vitamin Shoppe chain. Customers were sent a coupon good for 20% off an entire purchase and were informed of their automatic enrollment in Healthy Awards Club. Membership cards were enclosed for wallet and key chain.

Best of all, Vitamin Shoppe made clear that “we will add the points you earned this year at Nutrition Depot to your Vitamin Shoppe Healthy Awards account” and emphasized that “every dollar you spend earns points towards FREE merchandise”. A minor criticism is the unclear messaging about point transfer. Would the total account balance be brought forward or just those “earned this year”. Regular readers of Loyalty Truth know how we detest the marketing “asterisk” and this phrase appears to bear strong resemblance.

Not all customers embrace change. Bigger is not always better and just because Corporate Finance determined that an acquisition to expand the footprint would be beneficial to shareholders does not ensure that customers will see it the same way. Change can stimulate unwanted reevaluation of purchase decisions and habits. How many times have you, as a consumer, witnessed an acquisition and wished for the “good old days” in the aftermath?

Loyalty programs are meant to be differentiating factors in a business. All things being equal, they should make a difference, turn a head, and encourage consumers to give up a little “share of preference” towards the sponsoring business.

In this case, Vitamin Shoppe elegantly and effectively communicated with the loyal Nutrition Depot customer base and set the tone for this group to give them a chance. The 20% off coupon will stimulate lots of visits to trial the new stores. The enclosed membership cards and promise to make good on points earned provides further assurance that Nutrition Depot customers will take a liking to the new owners. Most importantly, Vitamin Shoppe communicated with sincerity and created a foundation of trust through their highly positive message.

Nutrition Depot customers could have felt “snake bit” in this transition, but instead feel like they have been invited to be part of a new creation. My bet is that the letter generates a high response rate. What happens next will be dependent on the availability of familiar product, pricing, and service – those factors that Loyalty cannot overcome, just emphasize to make a difference…….Bill Hanifin

I have long maintained that two moments of truth define whether consumers will engage with a loyalty program, the exception being that some loyalty geeks like myself will sign up for anything just to see how it works!

The two-step process goes like this:

1. What’s in it for me? A quick read of the “take me”, direct mail or email invitation triggers the “loyalty calculator” that resides deep within the human brain. Nearly instantly, we register brand compatibility or lack thereof, and calculate the potential reward and recognition of the offer. The outcome dictates our willingness to invest additional time to enroll and engage.
2. What do I get? The value proposition having passed the initial test, consumer attention turns to rewards. We ask ourselves, “So, if I earn what I expect from this program, what can I get in exchange?” Easy understanding of reward options and their accessibility confirms our continued interest in the program offer.

Assuming these two tests are successfully passed, the ball is in the hands of the program sponsor, who is now in a position to win.

A similar mental process can be mapped to how consumers think about any advertising offer. I observed a digital bank sign the other day which rotated several messages beyond just time, date, and temperature. My attention was drawn to the invitation “Want a friendly hometown bank? Visit Us”.

Intrigued by the message and the implied high-touch service from this community bank, I was making the right hand turn into the parking lot only to see the follow up display. “Restrictions Apply….. Details Inside.”

Even allowing for substantial benefit of the doubt, I was put off by this bank’s take on full disclosure. Every Sales 101 course instructs that you keep the prospect’s eyes on the benefits before directing them to the fine print.

In an earlier post, I described the “asterisk” effect that plagues many marketers today. In this case, the bank might have just as well printed a large asterisk on this sign, symbolic of the shifting sands upon which this message was constructed.

If this pairing of digital messages were part of an invitation to a loyalty program, I would have read the value proposition and then passed the rest to the shredder once deflated by the second message. In this case, I just moved the shifter to reverse and headed home!

Bill Hanifin

BP Visa Rewards Card

Seeing the low-fuel light illuminate on the dashboard signals different reactions to the driver based on how well you know your vehicle. Having driven my previous one for over 8 years, I could shrug my shoulders knowing that at least 3 gallons remained. My new ride was a different story and, on a day when gasoline prices hit record highs in the US, I made the first right hand turn when I noticed the indicator doing its job.

The BP (Amoco) station I entered was known to carry the highest prices in the area but the pain of donating a few more bucks to Big Oil was moderated by my fear of having to push the car into the cheaper station down the road. You could fairly say that I entered this consumer transaction with a negative brand bias.

Passing time as the tank filled, I noticed the display on top of the pumps touting the “New BP Visa Rewards Card”. The message shouted that I could earn up to $80 in cash with rebates up to 10% on BP fuel purchases. I was interested until I spied the dreaded asterisk. The offer was introductory in nature and good for the first 60 days only. The ownership cycle of a credit card is long enough that, to me, introductory offers are like women’s perfume, tempting and engaging, but possibly leading to a poor decision.

Fortunately for BP, Visa, and JP Morgan Chase (the issuer), I noticed a second asterisk. The card had been selected by Kiplinger’s Personal Finance as the “best gasoline credit card” in both November 2006 and 2007. This card was apparently worth a second look.

My loyalty calculator in full gear, I realized that according to the spending examples in the promotional banner, the blended funding rate (percentage rebate on purchases made with the card) was 4% during the introductory period and 2% thereafter. I also calculated that, even if I pumped all of my gas at the cheaper station, saving $.05 per gallon, I would have to use over 500 gallons of gas during the introductory period to equal the 10% rebate offered through the card, way beyond my level of demand.

Several questions popped into my head:

• With Big Oil increasingly viewed as the Darth Vader of commerce, would consumers consciously affiliate themselves with a cobrand gasoline card?
• Could using this payment device and consolidating fuel purchases make the “expensive” gas effectively the better alternative?
• How did Kiplinger’s justify their rating of the card as best in class for two years running?

From the bottom up, the Kiplinger’s web site didn’t provide much detail, though more could possibly be found in their print edition. My own evaluation is that the 2% rebate level is above most cards in the market, there are no limitations on the amount of rebates that can be earned, and the interest rate on the card is reasonable with a range of 12.24 – 20.24% depending on creditworthiness. Rewards options include $25 BP gift cards, checks made payable to the cardholder, or a donation The Conservation Fund, an environmental charity.

In all, the card represents a strong offer. Kiplinger’s top rated cash rebate card was Amex Blue Cash, and it topped the BP offer for cardholders who spend more than $6,500 per year. At that level, the base rate of 1% cash back jumps to 5%. The rebate on fuel and other purchases does reduce the effective rate paid per gallon and with prices soaring near $4.00, the rebates are going to be $.18 - .20 per gallon even after the introductory period ends. The advantage is lost if fuel purchases are not consolidated to BP, and I question whether people have the discipline to capitalize on the opportunity.

Brand is another matter. This case reminded me that one person focus groups are deadly. Just because I am a frequent flyer and might not want to pay for a business dinner with a fuel cobrand card, does not mean that a huge market for the card doesn’t exist. Many people not only want rewards, but want them with more immediacy. Cash back, the preferred reward in most focus groups I have observed, is attractive to many consumers.

I was only at the fuel station for a few minutes, but I was reminded of these lessons:

1. Card acquisition is a numbers game and rich introductory offers are a highly effective tool
2. Lower cost of acquisition can justify stronger consumer value propositions and BP has adopted a model that is highly efficient
3. Analytical segmentation of customer data will not go out of style anytime soon as there is a “card for everyone” and the challenge is linking the offer to the right audience
4. Even when the economy is tough and an industry is out of favor, well planned Customer Strategy can shift the advantage between competitors

Bill Hanifin

Ever since man has been on earth, we’ve been running. In the beginning, our motivation was the need for food, shelter, and survival. By the mid-twentieth century, pursuit of fitness through sweaty activities had become the domain of oddballs. Given the outlaw nature of adult fitness only 50 years ago, the origins of the 70’s running boom are remarkable.

Bill Bowerman, the one-of-a-kind University of Oregon Track & Field Coach, is most well known as the guy who shaped Steve Prefontaine’s front-running style into record breaking performances, and for having a hand in the founding of Nike. Few know that his chance trip to New Zealand in 1962 would lead to the jogging craze that swept America in the early 70’s.

Ask most people about running and they have an opinion – usually resolute and often diametrically opposed. The phenomena is so pervasive that New Balance has adopted it as the theme of its “Love and Hate” advertising campaign. Since I’ve logged about 35 years of pavement pounding, I can attest to man’s Cybill-like relationship with the sport. Some days the endorphins kick in and feet seem to float across the pavement. Other days, it just plain hurts.

In my experience, the most reliable anesthesia to dull running agony is to think. Allowing my mind to wander may have contributed to slower race times, but that’s another story. Through it all I’ve found that a good long run will clear the mind, spawn new ideas, and root out the solution for the problem of the day.

Soldiering through a 10K run the other day, I pondered the many ways in which independent retailers strive to breed loyalty and combat big box merchants. Punch cards and cash back discounts are the most common tactics used today. Listening to one merchant talk about his program recently, I realized that it was purely tactical, without strategic foundation, and absent specific objectives except for the hope that “more sales” would result.

As the ten kilometers that add up to the 6.2 mile run passed by, I assembled a list of ten questions that every retailer should ask when seeking to improve repeat purchase behavior among their customers. The answers can be blended with a bit of “secret sauce” in order to give their Customer Strategy new meaning.

The 10 K’s of Retail Loyalty:

1. Who do you really think is your competition?
2. What does your Brand stand for?
3. How are you identifying customers today?
4. What are you doing with any data collected?
5. What are the objectives of your marketing efforts?
6. Are your offers coordinated to meet these objectives?
7. How are you communicating with customers?
8. How do you measure results?
9. Are employees trained to understand and promote the program?
10. What are you going to do next?

Marketing resources are scarce and, in a tough economy, every penny counts. Working through these ten questions will lead to a simple, yet effective strategy that any independent retailer can employ to improve their business.

It’s no sweat!

Bill Hanifin

I own a Blackberry 7130. That doesn’t make me much different than any of my readers, except that, according to ATT Wireless, I’m a dinosaur.

I’ve owned the device since November 2006, which equates to 17 months in all. During that time, I’ve had to replace it once as the microphone stopped working, forcing me to use an earpiece to speak on the phone.

Through the course of ownership, I have become aware of two facts:

• Nearly instantly after acquiring this new phone, it was considered an old model by ATT. Today, it is greeted with quizzical looks from sales reps in ATT stores as if I was showing them a moon rock.

• The value of ATT Wireless stores, corporate owned or authorized reseller, is near zero once a purchase of new service or handset is completed.

To explain, each time I have sought service or to purchase accessories for the phone, the local stores could do nothing for me and justified their impotence by describing my phone as “an older model”. The replacement of my handset could not be processed in-store and I was referred to an ATT Wireless repair outlet. Yesterday, I learned that items such as replacement batteries are only going to be found via the website as the stores carry no stock except for brand new models.

The reason that wireless companies don’t generally have a loyalty program is that they don’t need one. Their business model is based on entrapment and any loyalty they enjoy is directly related to the term of the individual service contract.

All things being equal, the purchase decision for wireless service is driven by geography, price, and the current handset offering. Special promotions sometimes influence the final decision. Once the purchase is made, the consumer is generally locked in for up to 2 years.

Want to change your plan?

• That’s ok as long as you increase your minutes.

Want to change your handset?

• You have to wait for a year or so until you are eligible for an upgrade.

Want to upgrade earlier?

• Then pay an exorbitant price for a new phone or listen closely as the associates in the wireless stores wink at you as they suggest that you “lose” the phone when ready for an upgrade. Caution on this one: lose it more than once and your insurance will no longer cover the replacement. Oh yea, it’s unethical too…….

The root cause of the problem is that the wireless companies have evolved their business to a negative competitive state, i.e. all they can do is offer more minutes, lower prices, or bundle additional “free” services. The last frontier of differentiation is the handset.

Each wireless provider links up with manufacturers to launch new models with exclusivity. The ATT/iPhone partnership is the most visible example of this practice. The introduction was good for ATT users, awkward for anyone else. The cost of switching is still reasonably high and apathy, effort, and the (in)ease of number transfer are all barriers to changing providers just to acquire the latest phone.

With the handset positioned on the front lines of the wireless battlefront, the pace of change has accelerated, with each carrier pushing out new phones quickly to stoke the fires of customer acquisition. New models are constantly being introduced, and the advertising noise level is so high that consumers tend to tune it all out. Many new handsets seem to carry the same features repackaged in a new form factor. This frenetic pace of change has negatively affected the customer experience in transacting with wireless providers and is symptomatic of changes desperately needed in the industry.

The free enterprise system never stops teaching lessons. When companies behave in a way unpalatable for consumers, the market adapts. Don’t want to wait to be eligible for a new phone? Lose it! Want an iPhone but don’t want to change carriers? Hack the device to make it work on competing networks.

The wireless companies might want to consider these market behaviors not as something to be punished, but as guideposts to a future business model. When their own store associates are whispering instructions to beat the system, there is clearly a problem to be addressed.

My suggestion is to open up the device market, reduce contractual burdens, and provide better service at the store levels. Wireless boardroom fear is that high levels of churn will take place, but the risks are manageable. Just as with number transfer, after an initial surge of activity, each provider will land with a market share similar pre-change levels.

In the long run, giving the consumer more freedom, choice, and higher service levels in store will combine to create long term loyalty. Each wireless provider will then be competing in an open and consumer driven market.

Now that’s what I call a strong signal!

Bill Hanifin