When you’re selling hammers, every prospect looks like a nail. You’ve heard the expression before. The loyalty version of this is that many suppliers think every solution has to be currency based because that’s what they are selling.

I can hear the groans now, but don’t worry. I’m an advocate of data-driven marketing strategies that are measurable and, whether you like points or not, having a currency as the center of your loyalty program gives you an easy way to keep score. There are lots of other benefits too, an important one being that consumers who belong to the programs tend to allow the brand a mistake or two as they have a vested interest in protecting the value of their accumulated points or miles.

That said, there are situations that not so much demand a non-points solution, but enable it to the extent that points are not in the consideration set as a solution. I’ve categorized these into three models with a few brands as examples for each one:

• Price Driven: Walmart and Costco
• Brand Personality: Apple, Red Bull, Zappos
• Social Interactive: Tasti D-Lite and Carrabbas

Zappos is the subject of the day and although I had heard all the stories of how founder Tony Hsieh personally answers tweets to help resolve customer service issues (remember the famous tale from Tara Hunt on the subject?), the Zappos story truly came alive for me when I heard Jenn Lim, the founder’s spouse, make an inspired presentation about Zappos and her new business, Delivering Happiness.

Delivering Happiness was named after the 2010 book written by Mr. Hsieh and took on a life of its own after Jenn Lim and a core group of customer fanatic “Zappites” decided they wanted to spread happiness across the nation and across corporate America.

The spring of this Happiness that seems to be a renewable resource at Zappos is their company culture. Zappos believes so much in promoting a specific culture that it takes time to solicit the opinions of its employees, partners and customers in assembling its “Culture Book”. I was able to obtain a copy (all you have to do is ask) of the 2010 Culture Book and was impressed to read the 200 plus pages of testimonies from Zappos loyalists as well as see their culture documented in living color through the pictures in the book.

The Zappos Culture is based on 10 Core Values. You can get your own copy of the book, so I’ll just share my favorites from the list of 10:

1. Deliver WOW through service
2. Be Adventurous, Creative, and Open-Minded
3. Build Open and Honest Relationships With Communications
4. Do More With Less
5. Be Humble

Creating a corporate culture is one thing, having the commitment to really live it out is quite another. Zappos has used its culture as the basis for a business that is set apart from competition and that has created customer loyalty without giving away points, miles, or other formal trappings of a loyalty program.

There’s something to be learned here, especially in the age of Social Loyalty. As another saying goes ….. if the shoe fits ……

I’m a former Borders customer and past member of the now defunct company’s Rewards Perks program. While I freely admit to moving a lot of my business to Amazon over the years, I was sorry to see Borders go.

Maybe it’s nostalgia, but every once in a while I like to walk into a book store, stroll the aisles, and leisurely look for a title or two I may have missed. Just like reading a physical book has a tactile advantage over an e-reader, I also think a physical store has a sensory advantage over a virtual storefront—which for me, unfortunately, ultimately gets trumped by the superior selection and lower prices of an Amazon.

But back to Border’s. When the pieces of the company were sold off, Barnes & Nobel made an important purchase that went beyond the chain’s physical inventory—they bought Borders’ customer contact info and importantly, their purchase history, giving them the opportunity to send out personally relevant communications.

The wooing has begun, as B & N is now attempting to turn me from a qualified prospect to a customer. They’ve sent me a few e-mails to date and while I think my scant recent personal history prevents them from sending truly relevant messages, I do appreciate their efforts.

From a communications perspective, I think they’ve made a smart progression from showing sympathy over the loss of Borders, to being transparent when revealing the use of my Borders’ customer data, to being justifiably “retail-y” as they seek my business. See the messaging sequence below:

October 1: Sympathy Over the Break-Up

Dear Borders Customer,

My name is William Lynch, CEO of Barnes & Noble, and I’m writing to you today on behalf of the entire B&N team to make you aware of important information regarding your Borders account. First of all let me say Barnes & Noble uniquely appreciates the importance bookstores play within local communities, and we’re very sorry your Borders store closed.

October 15: Honesty and Transparency

Dear Borders Customer,

As a reminder, on September 30, 2011 Barnes & Noble acquired the Borders customer list. The transferred personally identifiable information in the customer list includes customer e-mail addresses and purchase history. No credit card data was transferred. If you would like to opt out of having your customer data transferred, please go to www.bn.com/borders by November 2, 2011.

November 7: Asking me out on a first date.
Subject line: Let’s get to know each other, starting right now.

You’ll always be welcome here. Nothing says welcome like an extra 30% off your first purchase at Barnes & Noble.

November 16: Attempt at a second date.

Subject line: A convenient 40% off at the always convenient BN.com

Your nearest Barnes & Nobel is open 24/7—at BN.com. Take an Extra 40%off one item.

I think Barnes & Noble is in a tough spot and agree with many that they’ll be the next domino to fall in the radically changing book industry. That said, I do think they’re doing a good job trying to convert prized prospects—former Borders customers like me—to the B & N fold. At least, they’re going down swinging.

At Hanifin Loyalty we like to talk about what it takes to build customer loyalty, but we also pride ourselves in being good listeners. We listen to clients and we listen to customers. Like the old saw said “God gave us one mouth and two ears for a reason”. Maybe they should be used in that proportion.

We’ve been listening to Millennials lately and we’ve shared a series of posts from our “Mystery Millennial” giving our followers insight into how Generation Y perceives the marketing efforts of big brands and local merchants.

Today’s story highlights why our Mystery Millennial loves Toys R Us.

Toy shopping with my little toddler is so much fun these days.

She sits in the cart eying the shelves with the kind of awe that such an exciting place inspires in children; innocently free from greed at her age. I love to indulge her wonder, and am amazed at what holds her attention, i.e. the cheapest trinket in the store. Much to my pleasure that’s a purchase that makes us both happy!

On a recent outing to Toys R Us I signed up for their rewards program. I had heard good things about recent updates to the program, and decided it would be beneficial to try and save some money. My experiences at the store surprised me, and the loyalty they established with me was not what I was expecting.

The main reasons I now shop at Toys R Us are less financially based and more thanks to the customer experience in-store. I have been reminded what old fashioned customer service looks like and how that often has far more weight with my purchase decision than just saving a few dollars.

The smiles, help, and conversations I have enjoyed from the employees at Toys R Us (even from the shy tech dude at the game counter) have renewed my love for shopping in-store rather than online. On one visit, I was inconvenienced when a security tag was left on a shirt by accident. It’s embarrassing when the alarms go off as you walk out the door and I appreciated the way store employees handled the situation and truly tried hard to make me a happy customer.

I will continue to shop at Toys R Us and Babies R Us. Maybe it was the money-saving rewards program which brought me into the store to begin with, but my loyalty to this store in particular was won by the sense of welcome and good cheer that I received from the people that work there.

In my opinion, a rewards program gains true loyalty when the fact that you just saved money is over-shadowed by the pleasure it was to shop!

Editor’s Note: There is wisdom to be gained by listening to our youth! Millennial marketers should lend an ear.

I’ve been studying the Millennials for the past 5 years to see what makes them tick. My selfish motive is to better understand the Millennials in my own family, but apart from that, I am fascinated with how their perspective on and love for technology will change the way marketers construct loyalty marketing value propositions.

At the very least, we have to embrace digital channels to deliver offers and to support program servicing needs. Going a little farther, we should be delivering offers, promotions and triggering incremental purchase behavior in a way that benefits merchants and program sponsors without adding a “creep” factor to the lives of Generation Y. As we’ve come to learn, this group might be the quickest to disconnect upon noticing incoming creepiness.

At some point, I concluded that “studying” might be the wrong approach. Why not skip the removed, third party observations and take the bold step of talking with them. After all, everyone wants to be listened to and human beings, regardless of generation, love to talk about themselves.

I am lucky to have a Mystery Millennial who has agreed to share her experiences with brands, retail and otherwise, and to share her candid experiences with Loyalty Truth from as the mood strikes.

Here is a short tale of interaction with Urban Outfitters that makes a very clear point. Read it and let me know what lesson you take away.

Mystery Millennial Goes Urban Outfitter

I have a large purse, I do, and I love my oversized bag. It has been very useful for collecting the small pieces of my daily life that don’t have a specific home, like receipts. It sounds crazy, but I’m toting around hundreds of little papers recording my retail history over the last month or so, a persistent reminder that I have not been diligent with my record keeping.

The other day I had a shopping experience that left me particularly happy at the checkout counter. I was updating my fall wardrobe at Urban Outfitters and, while making my purchase, was asked if I wanted to receive my receipt by email! I believe my response was a bit generous for the situation, but my enthusiasm was genuine. I was more than happy to hand over my email address for the sake of not adding to my already embarrassing collection of paper waste in my possession.

To top off my delight I had my receipt easily accessible right where I record my budget- on my computer. There was no digging through the infinite abyss (my purse), organizing by date, trying to read crumpled receipts, etc.

In a day and age of marketers pursuing the pocketbook of Millennials, I would say this is a positive step by a big retailer. They might have been motivated by “green” causes or just have been mercenary in pursing my email address. Either way, they made a positive impression by not wasting paper, and saved me time as well as space in my purse.

Editor’s note: I’ve got to ask our Mystery Millennial if she shops at CVS Pharmacy and is a member of ExtraCare. The program has taken a lot of heat for its long paper receipts, only one or two of which would choke Ms. Millennial’s purse.

Sometimes you work really hard for a small break. Other times serendipity shows its face and good things fall into your lap.

I’ve been lucky over the past month. First, I had the opportunity to interview Rob Markey, co-author with Fred Reichheld of The Ultimate Question 2.0, an update of the first version of the book which familiarized us with the Net Promoter Score. The book hit the market this month and you can find a good review of it on the Kobie Marketing blog, The Muse.

During October, Loyalty Truth will be featuring a three part blog series covering my interview with Mr. Markey. Stay tuned as I think you’ll find his comments interesting as well as see how Net Promoter Score has developed from a scoring metric to a practical management system that has been implemented with good results by many well-recognized brands.

The second piece of good fortune was my attendance at the ShopperTech Lead Marketing Conference. Al McClain and the good folks at RetailWire organized an afternoon of panels and I was able to participate in a discussion of loyalty marketing with BJ Emerson of Tasti D-Lite, Dan Frechtling of DS-IQ, and Bill Nasshan from Bi-Lo supermarkets. An executive summary of the conference can be found here.

To my surprise, one of the keynote sessions was given by Matthew McNerney and Tim Keiningham of IPSOS Loyalty. The two presented a new measure of customer loyalty, The Wallet Allocation Rule, which will be profiled in October in the Harvard Business Review.

The Wallet Allocation Rule correlates customer loyalty to share of wallet, and the executives from IPSOS report that “the correlation between a brand’s Wallet Allocation Rule score and its share of wallet was greater than .9 – a perfect correlation score being 1.0″. The score takes the relative ranking of competitors into consideration and is proposed as a new way to tie customer loyalty scores to wallet share and ultimately profitability.

Let’s give the marketplace time to absorb the IPSOS article in HBR (they are said to have the cover) and the new book by Messrs. Markey and Reichheld. The ensuing debate over how best to predict customer loyalty through these two scoring metrics will be one to watch.

Disappointing economic results were reported this week, with retail sales stagnating in August due to less than robust job growth and consumer confidence that continues to waiver. The U.S. Census Bureau reported that median income figures, adjusted for inflation, have declined 2.3% since 2009.

In related news, a report from the Conference Board on World Income Inequality stated that the gap between rich and poor in both the United States and Canada is growing to record proportions. Surprisingly resilient Canada has seen its span between have and have-nots growing at even a faster rate than the U.S..

Recent activity by Walmart indicates they are not only aware of these trends but are ahead of the curve introducing measures to engage and increase share of wallet with customers.  In fact, they added several features to their loyalty program over the past few weeks.

You didn’t know that Walmart had a loyalty program? Here are some of the key features:

• Supporting its brand promise of “Everyday low prices” with weekly price scans of 60 competitors to make sure they deliver on the promise
• A renewed layaway payment plan to ease the pain of major purchases for customers
• Re-stocking it shelves with a broader selection of goods, reversing an attempt to streamline inventory and offering more choice to customers
• Giving attention to private label product lines, focusing on its George clothing line

Walmart doesn’t have an explicitly named loyalty program, nor is it awarding promotional currency or giving away punch cards and key fobs at the register.

It does have a Customer Strategy, however, one that is based on understanding of its competitive environment and the needs of its customer base, while leveraging its supply chain advantage.

The illustration of Walmart’s approach to attracting and retaining customers is an example of how building Customer Strategies contrast from launching loyalty and rewards programs. Walmart is also unique in its market position and their strategy is not easily emulated by Target, Costco, BJ’s or others seeking traction with consumers in tough times. There can only be one low-price leader in a category and when that leader also happens to be the supply-chain gorilla, there are diminishing returns to be reaped as a follower, fast, slow or any speed in between.

When you sit down to create strategy to meet client objectives, keep Walmart in mind. They may be the anti-loyalty enterprise in a traditional sense, but they do represent a valuable case study in building effective Customer Strategy.

Carrabba’s Italian Grill stands apart from many of its chain restaurant competitors. Sure, the food is freshly prepared, the wood-burning grill adds ambiance to the setting, and the service is excellent, but I was thinking about their approach to building customer loyalty.

Looking at several national competitors in quick-serve (QSR) and white-table restaurant chains, I found that Starbucks, TGI Fridays, Dunkin’ Donuts, Tasti D-Lite all had rewards programs offering points for dollars spent in the location. Crate & Barrel as well as a host of national specialty retailers are partnered with Shopkick, offering Kick Rewards for purchase transactions as well as checking-in at the store and scanning selected product bar codes.

Carrabba’s has selected a different path, one that is principally communication driven, using direct mail, SMS and location based services to deliver offers, promotions and – just this week (see graphic) – money off coupons.

The Amici Club was launched in 2010 with enrollment available both on-line and in restaurants. I encountered the program as I suspect many people did – by filling out a 3×5 card placed on the dinner table. Talk about old school, but Carrabba’s says it has enrolled over 1 Million people to date.

Since my enrollment, Carrabba’s has been a cautious new friend, treating me with respect. I’ve received mostly emails and a few direct mail pieces offering something special related to a holiday or inviting me to a cause related fund-raising dinner. I’ve been paying attention to their mailings because they are not beating me to death, assuming that just because I signed up that I’m their newest “best friend”.

The parsing of the direct and email invitations I have received is a good example of how to manage a customer communication stream. Smartly coordinated communications can move people from enrollment to purchase to survey, leading to additional visits and a willingness to recommend the restaurant to others. In sum, Carrabba’s is effectively managing the customer loyalty lifecycle.

Carrabba’s has also encouraged check-ins with Foursquare and has used both the location based marketing channel and SMS to communicate offers when customers are ready to dine. That’s a great example of social loyalty at work – creating an exchange with a customer near the point of purchase, hopefully presenting an offer that will influence subsequent purchase behavior.

Now, Carrabba’s has taken the Amici Club a step further, sending a direct mail offer for $10 off specific appetizers or a complementary appetizer or dessert with purchase of an entrée.

Carrabba’s has been building its relationship with customers through the Amici Club thoughtfully and gradually, and is presenting a good example of how to engage with Consumer 2.0 using Social Loyalty tactics.

I’m going to continue to pay attention to Amici Club. Let me know what you think.

Aeropostale, Inc. is a specialty retailer fighting for the attention of a client base exhibiting limited or no attention span. I’m not mean, just the father of three children, so let’s just say that I’m experienced.

No matter how you describe it, today’s consumers are distracted and its not easy to engage them for long. That’s been the dilemma of marketers trying to reach Consumer 2.0, the always-on, always-connected generation of shoppers who seem to give as much attention to their mobile handsets and touchpads as they do the person next to them in line.

If it’s a challenge to engage and maintain dialogue with Millennials and those of us in older generations who have adopted the electronic life, think of the orders-of-magnitude greater challenge that exists when targeting 14 to 17 year-old young women and men (Aeropostale®) and 7 to 12 year-olds (P.S. from Aeropostale®). By the way, marketers need to find another verb than “targeting”. It’s mildly offensive for most people and somehow really doesn’t fit when talking about elementary and middle school kids.

To break through the clutter of this noisy and competitive retail world, Aeropostale® announced the introduction of P.S. Rewards, a multi-channel rewards program designed to benefit customers whether they shop in-store or online. According to the press release dated July 19, Scott Birnbaum, Senior Vice President of Marketing and E-Commerce at Aeropostale, Inc. stated “P.S. Rewards formalizes this (strong following) relationship and allows us to recognize our best customers with special privileges and activities.”

P.S. Rewards is free to join and members can earn 1 point for every dollar they spend in-store or online.  Once members accumulate 75 points, they receive a $5 certificate towards a future purchase, equating to just over a 6% funding rate. To balance reward with recognition, P.S. Rewards members receive “exclusive” benefits including access to VIP sales and events and birthday gifts.

The P.S. Rewards program is enabled by Smart Button, a technology savvy company that is making headway in the specialty retail segment. When asked about the new program, Trevor Edwards, Director of Business Development and Sales, told me “P.S. Rewards is an example of a new breed of loyalty execution that can help retailers enhance brand affinity, increase sales, and deliver a superior customer experience”.

I have no idea what’s planned next for P.S. Rewards, but given the fact that both the kids who love the brand and the parents who are paying the bills need to remain engaged, Aeropostale needs to invoke true creativity to deliver messaging for each group in the channel they most prefer to communicate. It will be interesting to see what comes next.

The three key trends identified by Parissa Behnia while attending the Customer Relationship Management Conference (CRMC) on behalf of Hanifin Loyalty LLC include the following.

1. The Promise of Customer Data: Collecting and accessing customer data isn’t just for marketing purposes anymore – it serves to inform the structure and strategy of the overall business
2. Have the Courage to Be Bold: To achieve full business potential, retailers need to become “bold” and walk out their brand promise through the delivery of customer experiences that differentiate and excel
3. Brick and Mortar retail is not dead!: Offline and online worlds are colliding and retailers need to identify and leverage “why” their physical location exists to understand how it can win over pure online commerce

We wrap up our 3 part series with discussion of Trend #3 today.

Hope for Brick & Mortar Retail
Sarah Lacy, Senior Editor of TechCrunch! stated that we are witnessing the revenge of the brick and mortar stores. Even though e-commerce is 10% of retail sales, it happens to be a very disruptive 10%. Many retail models have been turned on their heads because of this new way of shopping, selecting and purchasing products.

The way things were “always done” are no more and the reality is that there is some scrambling to keep up with mobile and other technologies to keep customers engaged, loyal and happy.

The original ways of doing business online were driven by convenience and low price. Over time, the online shopping experience has been transformed to include high touch or human driven experiences (e.g., customer recommendations, “people also bought” messages, live customer chats, etc.) – also known as curation.

Really, what’s happening is that offline and online worlds are colliding. As customers continue to transact online or on their Smartphones, these transactions are enhanced using real world experiences thanks to connections with others on these sorts of platforms: Yelp, Groupon, Foursquare, Twitter and Shopkick.

Ultimately, Sarah rightly pointed out that in some cases, it’s not that physical location exists, it is the why that makes physical location win over pure online commerce.

She recommended four strategies to improve brick and mortar retail’s chances:

Strategy 1: Play up your niche. It’s difficult to buy maternity clothes or food online. Celebrate that natural advantage over online but you can use online to enhance the experience.

Strategy 2: Pilots are your friend… There is nothing wrong with test and learn.

Strategy 3: Barbell. If something is best done online, then put it online. Make sure to have several high touch points in the customer journey to provide/reinforce what online can’t.

Strategy 4: Service. Nordstrom is an excellent model of service in this social commerce world. Aspire to that level of service and people will always come back to you.

Really, the most interesting part of the keynote was her level of optimism for brick and mortar. All is not lost and now is an excellent opportunity for traditional retailers to leverage the best of both worlds.

The three key trends identified by Parissa Behnia while attending the Customer Relationship Management Conference (CRMC) on behalf of Hanifin Loyalty LLC are listed below. We share more about Trend #2 today.

1. The Promise of Customer Data: Collecting and accessing customer data isn’t just for marketing purposes anymore – it serves to inform the structure and strategy of the overall business
2. Have the Courage to Be Bold: To achieve full business potential, retailers need to become “bold” and walk out their brand promise through the delivery of customer experiences that differentiate and excel
3. Brick and Mortar retail is not dead!: Offline and online worlds are colliding and retailers need to identify and leverage “why” their physical location exists to understand how it can win over pure online commerce

Have the Courage to Be Bold

Is your company bold? Does your company have the courage to be bold? The answer to these questions may be the difference between the success of Audi the last few years and the difficult tale of GM during the same time period.

Shaun Smith, Author & Partner, Smith & Co. spent an energizing morning talking to CRMC attendees about what defines a bold organization and how its boldness manifests itself in how it relates to customers, prospects and employees alike.

Bold firms share these characteristics:

1. Stand Up – They know what it is they believe in
2. Stand Out – They are remarkable and different
3. Stand Firm – The build communities for employees and customers to create sustainability around their brand

Why is it so important to be bold in either one of these three ways? It’s because “Purpose” is to be considered the fifth P of marketing. Now more than ever, companies need a raison d’etre to stand out and be compelling for their customers and prospects.

Mr. Smith shared an example to illustrate each point:

Stand Up Example

The Six Senses resort in Maldives is a prime example of an organization that stands up. In this case, it’s protecting the environment as much as possible. Their main value is concern: for the environment and for an exquisite customer experience.

Every part of this resort reinforces the value. When guests arrive by seaplane, they are given a bag for their shoes in keeping with the “no news and no shoes” policy. There is no television or any sort of outside access because the purpose of this resort is luxurious relaxation. In respecting the environment, they are vigorously devoted to a recycling and reuse program. 50% of profits they’ve made from their own purified water go directly to parts of the world where there is no access to fresh water.

All of this reinforces the brand message of “intelligent luxury”.

Stand Out Example

Unlike many luxury brands, Burberry has seen tremendous profits of late. Instead of going into a protective mode, Burberry took the time, effort and energy required to differentiate the brand and its quality vis a vis the competition. The company invested heavily in mapping the customer journey such that they identified and understood all angles of opportunity when a customer evaluates Burberry product.

Burberry has mastered the art of democratic luxury and, In as many ways as possible, they try to attract people to the brand and to interact with the brand. Burberry stands out because it engages in infectious communication.

They create “wow” in as many ways as possible in their customer experience. Their artofthetrench.com has 400K loyal customers who uploaded pictures of themselves onto the site. Also, they brought the masses to the runway by having 3D fashion show screening events, showing these same fashion shows real time on the internet and added the ability to order Burberry product from an iPad app.

Stand Firm

Zappos is a perfect example of a company that “stands firm” in that they walk their talk. Though it appears the sell bags, clothes, shoes, etc., what they actually sell is service and what they deliver is happiness.

They are committed to their culture not only with how they interact with their customers but also how they engage with each other inside the company. Culture is so important to Zappos that if it appears during training that a new hire will not be a good cultural fit, they will give that person $2K and terminate the relationship.

By standing firm, Zappos creates rites and customs that are guideposts for its values. These rites and rituals ranging from real time engagement with customers on social platforms to quirky office meetings and recognition activities within headquarters.

Taken together, Zappo’s is able to continually reaffirm its corporate identity and stand firm as it recommits to its values.