There’s a fascinating article titled “The Dawn of the Relationship Era in Marketing” that recently appeared in AdAge magazine. It’s written by David Rogers and Bob Garfield, the latter the same guy who caused a stir a few years ago with the essay “The Chaos Scenario” which (semi-correctly) predicted “the end of advertising as we know it”.

This piece isn’t quite so controversial, but it does point out that the role of marketing in the selling equation is changing. The authors posit that we’re witnessing the end of  “the Consumer Era” and are now moving into “the Relationship Era”.

The Relationship Era is based around the idea that companies that succeed in the future will do so because they’ve made some sort of human connection with their customer base. The belief is that in the Relationship Era, the big winners will be companies that people trust because they have “solid core values” and “transparent and honest practices“.

These companies will spend little on advertising—because they won’t need it. They’ve made a personal connection with a core group of customers who trust them implicitly, because they’ve backed up their core values with actions. They can then rely on these loyal customers to spread the word about their products and services and attract new customers. It almost seems the logical result that comes from a well executed corporate social responsibility policy.

The authors believe these brand-fan customers will: “…share your links and retweet you on Twitter and post a photo of themselves with your product on Facebook and like you on Facebook and generate all these network conversations, which go back to the top of the funnel and influence other customers in your network at their own stage of awareness, consideration, preference or action.”

So how do you get to be one of these beloved companies who people are tweeting and posting about? It starts with a purpose according to Rogers and Garfield. “You have to explain to all comers why you’re in business.” Among the companies identified as successfully “explaining” themselves and their values are Apple, Whole Foods and Trader Joe’s.

One prime example that’s cited is outdoors outfitter Patagonia who for years has had a purpose that resonates with its customers: Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis. The company then backs up this mantra with real-world actions, donating 1% of its gross sales to environmental causes, promoting environmental sustainability in every aspect of its operations and providing progressive workplace policies like paternity leave and paid sabbaticals.

Another company identified as a having authentic purpose: Krispy Kreme. After a rough start to the decade, in 2009 a new management team went searching for the company’s raison d’etre and came up with: “Touching and enhancing people’s lives through the joy that is Krispy Kreme. Management then “decreed that the joy ethic inform every interaction at every level of the business.”

My take: I can buy into the Relationship Era—but only to a point.

It’s hard to argue with companies like Trader Joe’s and Patagonia, that have carved out their own unique niche in the marketplace with little to no advertising, but lots of positive word-of-mouth and social networking buzz. After all, what’s not to like about free advertising? But the fact is, these kind of companies are few and far between.

Put under a microscope, I’d say the majority of US companies would be unable to pass the “authenticity” sniff test. Even successful companies often aren’t nimble or visionary enough to coalesce around a single purpose and execute it in the marketplace. It’s just not in their DNA. For instance, I wonder if every Krispy Kreme franchise has really been able to add “the joy ethic” to every business transaction.

The good news: companies that lack a specific purpose their customers can rally around, have other ways to grow their business and increase brand loyalty. This includes doing all they can to improve the customer experience from pre-sale to post-sale. It also means enhancing customer engagement, so that customers are communicated with in personal, relevant ways across a variety of touch points.

What do you think—is the Relationship Era upon us?

2011 began as a year with loads of promise for Loyalty Marketing. Top of mind for most program managers was the need to add value for members while keeping costs under control, and to better manage the financial liability associated with unredeemed points and miles.

Purchase behaviors exhibited by the Millennial generation were being adopted by broader segments of the population, and early in the year we estimated Consumer 2.0 to represent about half the US population, or 150 Million people.

With the old school orientation of most loyalty marketing strategists, cracking the code of Social Loyalty to engage, entertain and retain the business of Consumer 2.0 was one of the most intimidating challenges faced by the industry over the past 10 years.

So how did the industry fare in 2011 and what’s ahead for 2012?

On the liability management front, the year started out with more rumors floating about than during an American Idol contest. Solutions designed to unify consumer loyalty wallets and create uber currencies, some of which could be redeemed in real time point of sale transactions, as well as those promising unprecedented levels of consumer targeting via internet banking and credit card transactions, were receiving lots of attention. While we still wait to hear more from Free Monee and Swift Exchange, Cardlytics took a big step ahead by closing a $33 Million capital investment from Groupe Aeroplan.

Two highly viable solutions which loyalty marketers should consider not only as liability burn solutions, but as means to to add a new wrinkle to the value proposition are KULA Causes and LoyaltyShares. KULA Causes, which launched in fall 2011, introduced a new concept of Cause Related Loyalty marketing. The “currency of giving” enables loyalty program members to convert miles and points into donations to any of over 2 Million charities around the world. This is a concept which triggers consumer emotions and allows brands to heighten their quotient of corporate social responsibility in a financially efficient manner. LoyaltyShares is equally innovative, allowing loyalty program members to convert miles or points into shares of stock in the sponsoring brand. Converting liabilities into assets is a magic trick that any financially savvy consumer should like.

PointTunes.com and The First Club each introduced solutions that change the way digital content can be obtained by consumers through a rewards program. Improved customer experience and lower costs for program operators are key advantages.

Social Shopping became a reality as Zavee.com and ThanksAgain expanded their respective footprints and delighted consumers in their chosen market segments. Zavee has grown to boast over 500 brick and mortar merchants in their network across South Florida, while Thanks Again penetrated the airport frontier seeking to become a loyalty currency that travelers will aspire to collect before they fly.

“Gamification” took a big step forward during 2011 as both Badgeville and Bunchball proved that “gamification is not a fad”. Watch for much more in this space as game theory moves from a solution designed stimulate consumer engagement to one that can change consumer behavior across a full value chain.

As consumer research consistently supported the desire for immediacy and transparency of rewards along with improved customer experience and proximity to the loyalty “experience”, some important brands proved they were listening.

Early in the year, American Express played the social card as it touted Membership Rewards as a “social currency” and tested location based promotions with Foursquare. More recently, Groupe Aeroplan rebranded as Aimia, signalling a new era of competition among industry leaders.

In a year when many industries slogged along in a mediocre economy, Loyalty Marketers could barely keep up with all the change.

What will 2012 hold in store? I’ll have a look at trends to watch in a future post as the New Year gets started.

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.

In the final part of our Three Part interview series with Rob Markey, Bain & Company, we share insights from Mr. Markey on how to better execute surveys, whether to introduce incentives to improve survey responses, and get his opinions on whether NPS or other metrics will eventually influence share prices on public exchanges.

Oh yes, we’ll also get to the bottom of whether there really is “just one question” to get a grip on customer loyalty.

Many firms have response rates to surveys in the single digit range. Some respond by offering incentives to drive up response to their NPS surveys. Mr. Markey stated that “at Bain, this is evidence that you are not earning your customer’s feedback”, adding that “offering incentives is almost always a sign that a flaw exists in the customer feedback process”.

Listening to the results that do come in and making change on the front lines will earn your way to 30-40% response rates over time. Rackspace, one of the examples cited in The Ultimate Question 2.0 gets above 60% response rates to its surveys. “Here’s why” stated Markey “Rackspace earned participation in its surveys because they are meaningful to the customer”.

According to Markey, being satisfied with a 5 – 15% response rate is dangerous. Business should seek the root cause for low response rates and test surveys across groups that are weighted to promoters, passives and detractors. “Detractors are less likely to respond to a survey than prompters” said Mr. Markey, and “bias needs to be rationalized through testing”.

When I asked Mr. Markey if measures of customer value predicted by NPS or other scores would one day influence share price and market capitalization, he said that “it was already happening.” Though he cited confidentiality, Markey stated that “an average category leader in NPS scores grows at least 2X competitive growth rates”, adding that “several nationally recognized investment firms pay attention to NPS as an indicator of companies they would invest in”.

I couldn’t let my time with Rob Markey end without asking one big question: Is there just one question that companies can use to predict and / or measure customer loyalty? Markey explained that “when done on an apples-to-apples basis, NPS correlates closely with other measures such as satisfaction, but that “if the goal is to find the best statistical predictor of individual customer behaviour, most likely a multi-variable index will be superior to any single metric index”.

For example, the investment firms cited earlier use NPS as a predictor of value, though it’s not the only metric considered. Having said that, Markey added that “in many instances, NPS will replace traditional customer satisfaction metrics, mostly for the practical superiority of the NPS system”.  “Not a single loyalty leader measured their way to success” said Markey, adding that “it’s hard to get employees fired up about some metric”.

For Markey and Reichheld, the metric is the starting point. It is the metric that provides the compass to navigate the path forward, but it is the system that is the path itself. The victory in where they have arrived with “The Ultimate Question 2.0” is that the system has been created and business now has a reliable option to predict customer loyalty and to help bring continuous improvement to the enterprise.

My interview with Rob Markey about the new book, The Ultimate Question 2.0 “How Net Promoter Companies Thrive in a Customer-Driven World”, continues today with a closer look at how the “score” has evolved into a “system”.

The book includes a number of case studies ranging from Charles Schwab to Apple Retail to The Progressive Group of Insurance Companies. One common element of execution employed by each firm was to include a short-cycle, closed-loop feedback mechanism that turns survey results into usable business intelligence that front-line managers and employees can use to better serve customers.

Mr. Markey emphasized the importance of collecting accurate NPS survey scores but also to determine the root cause of interactions that leads to people becoming “promoters” or “detractors”. Was a price too high? Could a better deal be found at a competitor or did the competitor allow more flexibilities in service agreement rules? Whatever the reason, it is essential to be able to deliver feedback from customers to the employees most directly responsible to deliver enhanced customer experience. Through the accumulated experience from working with multiple companies across varied industries, Markey and Reichheld were able to dig deeper and understand practical methods to create change.

Markey stated “Everyone in the enterprise managing a customer touch point needs to build greater understanding of where they stand with their customers, whether front-line personnel or executives… for real change to take effect, business people have to translate elements of feedback into usable and actionable items that customers can understand.”

The second critical element Markey noted was the ability to connect NPS improvements to robust economics at the enterprise level. Markey explained “managers must be able to demonstrate what it’s worth to improve NPS scores versus the competition, or the value of changing a detractor to a promoter”.  This is aspect of developing a learning environment through working with multiple enterprises that has helped to transform the score into a system.

Markey capped off this line of thinking by sharing three essential elements to successfully putting NPS to work in your business:

1. There must be a reliable way to evaluate and sort customers and employees as promoters, passives, or detractors. This evaluation must then lead to identifying customer behaviors that can be analytically tied to positive business outcomes
2. An organization must create a fast-cycle, closed-loop learning process to deliver survey as well as verbatim results to customer-serving personnel. The organization should engage in “deliberate practice” over time to demonstrate to customers that they are listening to their critiques and expression of preferences.  This could be the most distinguishing characteristic of the three elements as traditional customer satisfaction research is anonymous and misses the opportunity to establish two-way communication with customers
3. The commitment to earning the loyalty of customers must be a top priority of the organization and be supported from the top down. This commitment must be embodied in daily actions and NPS must have a high level visibility with employees. Firms putting their weight behind NPS initiatives in a sincere manner earned the best results.

When asked about finding the balance between focusing on the customer and enabling employees / associates to deliver critical feedback, Markey responded “low employee engagement is impossible to coexist with high customer NPS”. He continued “a company may create a temporary market advantage through innovation or pricing, but it is difficult to sustain high levels of scores without employee engagement”.  “It’s not just the right thing to do”, added Markey, “it’s necessary to rise above the competition”.

Interestingly, only about half of the firms encountered by Bain & Company over the past 5 years working with NPS take such a position. Reflecting on the recent economic downturn, Markey cited that “the companies which entered the global financial crisis with higher reserves of goodwill and higher NPS experienced lower dips than the general marketplace”.

In the final part of the series later this week, we’ll share some interesting tips from Markey on successful survey execution and find out if there really is “just one question” that can be used to determine customer loyalty levels within a business.

In a previous post I mentioned that I was the beneficiary of a serendipitous moment in which I was given the opportunity to interview Rob Markey, a partner in Bain & Company’s New York Office and head of the firm’s global Customer Strategy and Marketing practice.

The topic was a new book, The Ultimate Question 2.0 “How Net Promoter Companies Thrive in a Customer-Driven World”, which Markey co-authored with Fred Reichheld and published in September. The book was a revised and expanded edition of The Ultimate Question, the original book published in 2006 which introduced the world to the Net Promoter Score (NPS).

When I spoke with Mr. Markey, he was quick to shift my focus from “book review” to developing an understanding of how NPS had evolved from a scoring metric to a system which had developed through the collective experience of the thousands of companies working with NPS since 2006. With so much to talk about in a brief period of time, I have crafted a three part series of posts covering the interview, of which this is the first.

Having received a copy of Fred Reichheld’s book, The Loyalty Effect upon walking into the doors of Frequency Marketing in 1999, I was more than familiar with Reichheld’s ground breaking thought that “loyalty” had to be formed with top-down strategy that included not just customers, but also employees, shareholders, even suppliers.

This timeless path to creating sustainable competitive advantage has been followed by thought leaders in the loyalty marketing industry, though much of what we see in the market today known as loyalty or rewards programs have fallen short by focusing on customers, while giving a disappointing hand-wave to the interests of the other constituents.

There are voices in darkness supporting Mr. Reichheld’s original thesis. One industry group has emerged, the Enterprise Engagement Alliance, which is “dedicated to the concept that engagement is an enterprise-wide endeavour that begins with people and ends with profitability”. The organization’s principle mission is to support research and education to help brands “make the connection between engaging people in business and long-term financial performance”. Colloquy has a renewed focus on Enterprise Loyalty, and I have taken my stand by preferring to frame our work for clients as delivering Customer Strategy. In my opinion, every organization needs a well planned and executed Customer Strategy, while not all need a “Loyalty program”.

Markey started off by sharing that his initial interest in this topic came through reading Reichheld’s 1990 article “Zero defections: quality comes to services”. Markey’s curiosity to identify tools for making decisions on behalf of customers instead of just shareholders led him to Bain and Company and he has been working closely with Mr. Reichheld ever since.

Markey told me that this 20 year quest has led him to adopt a simplified notion of the ultimate objective – to transform the golden rule from something nice to say about customer relationship management, to something that can be implemented and drive tangible results to a business. Working with Reichheld, a system of thought was developed that, if implemented as intended, would lead to sustained market improvement and to making good decisions to earn customer loyalty.

When asked about the central point of the new book, Markey explained that the 2006 “one big question” book was meant to introduce the thesis, explain the metric construct, show how to measure, it and lay out the argument for adoption. In essence, it was a starting point.

When asked what he had learned in the years between 2006 and today, Markey pointed to the fact that Bain & Company has worked with dozens of companies around the world to implement NPS in their operations and have seen tremendous results returned, from lower churn rates, lower acquisition costs, and improved sales and profitability per customer.

In short, the “score” had become a “system” with a solid methodology to help firms guide implementation and enough market feedback to confidently predict results. Part Two of the three part series will cover how the systems works as well as share the three essential elements to successfully putting NPS to work in your business.

Editor’s Note: Frequency Marketing has since become LoyaltyOne, while The Loyalty Effect still sits on the shelf in my office, dog-eared as all good books should be.

Someone help me. I’m being bullied by Southwest Airlines.

Actually, a better set of descriptive terms would be pestered, annoyed, or amused, depending on the day.

The source of my discontent is my mailbox. Southwest has sent me a solicitation for its frequent flyer cobrand credit card at least once per month for probably the past 2 years. The mailers are varied in style, size, and color, and each are of high quality. I know the airline is spending significant money on each piece. What’s your guess as a direct marketer? $1? $3?

Whatever the price, it’s all being wasted on me and if they continue to send these mailings, I am going to dig out a receipt for the shredder I recently purchased and send it to them for reimbursement. Their mailers being a big contributor to shortening the lifespan of my shredder, it only seems fair.

In all seriousness, I spend a lot of my time sorting through customer transaction data to create Customer Strategy. When we begin to address how to translate strategy into visible campaigns, we focus on a number of tactical elements, forming a program blueprint for operations. The communications strategy is one key step in the process and I am sincere in attempting to help clients manage their finite marketing budgets to their best advantage. The first step to managing resource allocation is to decide “who” to mail and “what” we should mail to them. There are always value thresholds that trigger certain mailings as well as limits to how much we advise to invest in a specific group of clients.

For instance, if we see a segment of customers attractive to the business on any number of metrics, we’ll test various mailings across the group and measure results. I am pretty doggone sure that if I noticed a segment that I had mailed consistently for more than 1-2 years with no response, I would drop them from the list, at least for a while.

None of what I have just written will surprise an experienced direct marketer. Why then does Southwest continue to mail and mail and mail?

Don’t get me wrong. I’ve come to like the airline and its in-flight experience. And their recently re-launched Rapid Rewards program was extremely well communicated via email and print mail.

Southwest is doing some things well, but inexplicably is impacting my impression of its brand with these non-stop credit card solicitations. Maybe the answer is that their bank partner is driving the mailings, and the partner’s desire for new cards outweighs any concerns about customer experience.

Cobrand relationships carry inherent conflict of interest and must be carefully managed. The bank’s desire for new cards can negatively impact customer impressions of the airline itself. Most consumers will only notice the Southwest branding all over the envelope. The bank’s name is relegated to fine print inside the envelope.

Given this scenario, who do you think stands to gain most from mailing me to death, and who is really taking the risk from a branding perspective? Personally, I would like to be removed from their list and have Southwest award me Rapid Rewards points in exchange for all the money they will save on me.

As Paul Harvey says “now you know the rest of the story”.

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.

Everyone knows that the air travel experience isn’t what is used to be. My recent trip around the world in 5 days served to accentuate the contrast of today’s reality with more elegant days past, while reminding me of solutions that remain untapped by the airlines to improve their standing with frequent flyers.

Some aspects of the air travel experience are so egregious that even the most generous frequent flyer program can’t overcome the problems. My opinion is that the airlines must embrace change, or risk permanently relegating their valued frequent flyer programs (FFP) to a commodity status.

The issue of airline profitability has to be front and center in this discussion. Since the bottom of the most recent airline industry economic cycle, the airlines have continued to homogenize their fleets, moving to more efficient airframes. Schedules have been set to meet demand with a thin margin of error, meaning that nearly every flight one takes these days is fully loaded. Labor agreements have been renegotiated by the majors, and lower cost entrants started out with more advantageous compensation models. Mergers have taken place with collapsing hubs wringing new efficiencies out of the network. Fuel remains a variable expense that is difficult to control, but whose impact on profitability is smartly managed by airline managers with forward purchases and hedged contracts.

The sum impact of the profitability discussion should mean that if the current generation of airline managers are truly competent, then the core issues of profitability should be accounted for and it should not be pilots, flight attendants, customers, and FFP’s themselves that are penalized each time the airline misses its financial projections.

Some ready examples of how the flying experience has degraded include:

1. The in-flight experience has been deconstructed in search of “ancillary revenue” at multiple touch points, most of the changes coming at the expense of the customer. Baggage charges, early check-in fees, “extra leg room” seat charges, and the near elimination of free food and beverage are familiar pain points to those who fly often.
2. Changes to the management of the “standby list” at airports have resulted in irrational policies that frustrates flyers. During an exhausting trip to Malaysia and back, I was denied boarding on two flights that would have saved me 5-6 hours of travel time, all because my FFP status with the airline didn’t merit this “privilege”. Both flights left with over 30 empty seats.
3. The need to implement Enterprise Engagement Strategy across major US airlines is clear. Somehow, the financial struggles of the airlines has trickled down to cabin crews such that these otherwise kind people approach cabin service in a near-adversarial manner. On code-shared flights from Miami – Kuala Lumpur and return, the legs operated by the foreign carrier partners were full of smiles, great service, and helpful attitudes. Sadly, the legs operated on US airlines were characterized by a generally surly atmosphere.

There is a corresponding list of solutions that are easily within grasp of the airlines to execute:

1. If the airlines would use their data, as complete a customer data set as any industry outside of banking, to link lifetime value and previous FFP status to customer records, it could support customer service decisioning and create the opportunity for customer delight. Lifetime FFP miles, an indication of past patronage, are known and previous tier achievements can be remembered (Gold, Platinum, etc.). Airlines could use these simple indicators to make occasional exceptions to care for valuable business flyers, regardless of their current status. As we all know, the flow of business drives who and where we fly, and a person can become more valuable upon signing of the next long term client contract.
2. Avoid the temptation to monetize every step of the flight experience. Just like financial people who can ruin points-based loyalty programs by falling too much in love with breakage, fees, and by tinkering with redemption levels, airline managers must return to a more bundled experience. Give a little, earn a lot.
3. Include cabin and ground crews in the magic of creating a memorable flying experience. Give counter and flight attendants a reason to smile, and help all associates remember that the people in the seats really are paying the bills. This might be the most powerful suggestion in this list, and successful achievement of the objective is more a matter of will than anything else.

I’m not an airline basher by nature. I spent 10 years as a supplier of components to commercial airlines and have family members with entire careers piloting passengers around the world. I am pulling for the airlines to “up their game” by recalibrating their interest in ancillary revenue and cost-cutting with the in-flight experience.

There is a happier balance that can be struck for all parties. If that balance can be achieved, then FFP’s can be better used to truly influence airline choice.

Attending the National Restaurant Association show recently, I solidified some perspectives on social couponing and collective buying schemes in a post here. The buzz from domestic restaurant marketers over how best to leverage collective buying sites such as Groupon, Living Social, Facebook Deals, and the myriad of copycats that have emerged over the past 3 years has been intensified with Groupon’s announcement of its IPO.

Commensurate with news of the IPO were published articles on the “checkered past” of Groupon’s Chairman, Eric Lefkofsky, and new articles documenting Groupon “merchant disasters”. For
restauranteurs and merchants alike, I thought it was time to share a brief guide aimed to optimize your social couponing efforts. If you’d like to learn more or talk in full depth on the subject, feel free to be in touch with myself or Hanifin Loyalty.

There are a series of work phases to engage in order to successfully execute a social couponing promotion:

1. Pre-Planning
2. Operational Considerations
3. Post-Event Evaluation
4. Communication & Next Steps

Pre-Planning
To properly evaluate and offer construct, consider the seasonal time-frame for the offer and build projections and financial models to support back-end evaluation of response profitability.

Include the following items in your consideration set as you build a financial projection for the promotion:

1. Projected number of responses across eligible time-frame
2. Average value of sale
3. Number of customers carried along with coupon event – buyer plus
4. Normal sales, traffic counts for time-frame
5. Gross, net margin
6. Incremental/complimentary sales – up-sell, cross-sell
7. Incremental expense – personnel, cost of goods, logistics, new systems, accommodations/concessions to satisfy customer experience

Operational Considerations
Once a promotion is evaluated and justified, the details of execution must be analyzed. Take these steps to meet with success in market execution:

1. Consider what it will take to support any spike in traffic and customer seating to deliver a consistent customer experience for all patrons. Both patrons whether redeeming a collective buying coupon and paying full price should be accommodated in a manner to complement your brand.
2. Inform your staff prior to the coupon going live so that they know what to expect. Good communications will ensure that your front-line associates are not only prepared for a possible new customer onslaught, but will greet customers with a smile.
3. Address any legal terms and conditions that you want to put into place to protect your return on investment, while maintaining the integrity of your customer service philosophy. Don’t comprise customer friendly and easy/fast/fun just for the sake of running the promotion.
4. Include your suppliers in pre-promotion planning and tactical execution plans to ensure you have sufficient provisions and inventory to meet customer demand. You certainly don’t want to run short on product supply, putting yourself in position to create backorders and issue “make-goods”. Remember this is an opportunity to gain new customers, so be certain you will be able to delight them, in turn encouraging return visit. Do this well and you will hopefully create an army of brand advocates through reviews and referrals via FourSquare and fans/likes on Facebook.

Post-Event Evaluation
No direct or loyalty marketer is worth their skin unless they measure results and know how to do better next time.

Let’s assume you survived what felt like an enormous volume of traffic and that your wait staff reported lots of new faces making a store visit. By all reports, the promotion registered positive results.

Now what? Specifically, what do you measure to gain confidence for the next time?

1. Was there any buzz in the form of reviews or Likes on Facebook?
2. Were there any negative comments on blogs during the redemption time-frame that related to the offer?
3. How much was redeemed and what was the breakage rate?
4. What tender was used for payment?  This helps for future promotional tie-ins with credit card issuers.
5. Can you tell who redeemed, how many customers were new, how many have returned for second visit?
6. Did you meet or exceed your financial projections?  Was it a positive return on investment?

Communications & Next Steps
The cardinal sin in social couponing is to be “one and done”. To build sustainable impact for the business, you must commit to doing this more than once.  What did you learn from your first dive into the deep end of the pool and, assuming you didn’t drown, what’s next?

1. Leverage insight on those who redeemed and adapt or personalize your e-mail communications to take advantage of what you learned. Make all communications as relevant as economically possible and as your data permits to improve open rates, click-thru in order to see new profitable transactions.
2. Are any new customers acquired having a birthday soon? Any new customers acquired having an anniversary or special event (graduation, etc.)? What will you do to create a stronger relationship with these folks?
3. Adjust the timing of the redemption window to best suit your seasonal traffic patterns
4. Gain new insight by incorporating a link to a survey page so you can learn more about your customers and other members of their household
5. Support franchisees with personalized communications custom to their location
6. Consider incorporating community events into your next wave of digital couponing. Choose from events unique to your location, whether music, promotional giveaways tied to beverage partners, or something else.
7. Adapt learnings from the coupon event to test/learn on new offers. Consider changing the threshold offer spend or offer something free. In either case, base your numbers on what was observed in the last transaction

Beyond good execution of your collective buying experiment, think about how you can use the platform to create additional offers that will strengthen customer engagement and build longer term customer loyalty. For restaurants, you might consider offering a complimentary benefit for dining with you again, or create a package offer with music or entertainment partners in the area.

Collective buying isn’t a strategy, it’s a tactic that, when solidly executed, can yield good results for a business. Following these steps in planning and execution will improve the chances of success and create a foundation for future promotional enhancements.