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.

Air travel has changed from an exciting and privileged experience to something considerably less elegant. Leisure travelers absorb the shock from ever-changing TSA procedures at security checkpoints, and unknowingly contribute to the woes of their fellow travelers when they board loaded down with enough bags to make the Beverly Hillbillies look like minimalists.

For the business traveler sitting across the aisle, aspirations of time efficiency and comfort are placed on a 3 hour hold each trip as seat pitch has become so tight that only a notebook computer will open up comfortably in flight.

Corporate travel is increasingly driven by economics, and many flyers who used to hold out for a legacy carrier to fly in familiar circumstances and collect more frequent flyer miles are now abdicating “loyalty to the livery” and accepting the best combination of schedule and price – period.

There is a lot of talk among airlines and consumers about how to improve the air travel experience, and last week Spirit Airlines took a bold step towards “improving” the situation by announcing it would impose baggage fees – not for checked bags – but for bags carried on with intent to be placed in the overhead bins as of August 1.

Ben Baldanza, Spirit’s President, has been making the media rounds defending his airline’s new policy. Advancing a questionable argument, he has been rationalizing the new policy saying that consumers will actual save money on a net basis because Spirit’s fares are being reduced, and that 5 minutes saved in more efficient boarding  of aircraft accumulated over a 24 hour period will save 20 hours of airplane time per day – the equivalent of having two extra $40Million planes in the fleet. If that isn’t fuzzy math, then I don’t understand the concept.

Spirit’s new baggage policy has its foundation in operational efficiency as do many similar airline policies. The trouble is, they seem to have forgotten about the customer in the process. Between the new baggage policy and the recent announcement of its “pre-reclined seats”, Spirit is either focusing ever more narrowly on its target market, or is outsmarting itself one new policy at a time.

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Spirit may be wiser than we think. They are a price-driven airline appearing to cater to the leisure traveler. It is possible that they have abandoned all thought of courting the business traveler, and are moving ahead with new policies to further strengthen its position in its chosen market.

Spirit’s promotional marketing strategy is oriented to the leisure flyer. In a recent survey of email communications used by loyalty program sponsors, Hanifin Loyalty found that Spirit was the single most prolific sender of email among 22 companies studied, with an average of 14.77 emails per month. With almost zero evidence of behavioral triggers in its email flow, Spirit uses edgy messaging to tout low prices in over 96% of its emails.

In my view, there can only be one low price leader per category. In retail it remains Walmart, and in air travel, it could be Spirit. There is risk to this strategy, and cracks have appeared in Walmart’s low-price strategy recently as consumers are questioning if in fact they offer the lowest prices around. There are several discussions on Retail Wire on the topic and here is a link to one of them. The warning is that once a company is positioned as the low price leader, they have little to cushion their fall should they lose the advantage as customer experience and quality are often perceived to be below the competition.

Time will tell if Spirit has made the right moves and, while the market decides, my vote is for the regulators to stay out of it.

I believe that many business travelers will resist these changes and avoid Spirit or any other airline who adopts similar policies for two big reasons – checking a bag limits the ability to make changes to an itinerary on the day of travel and costs business travelers precious time once landed at a destination.

Spirit has the right to choose its course, as do we in the frequent flyer population.

What do you think?

Black Cats, Black Magic, and Black Friday … sounds like a threesome to avoid.

But untold millions will be lining up the day after Thanksgiving in the wee hours of the morning with steely-eyed focus and adrenaline pumping – all with the almighty bargain in mind.

Maybe it’s a gender thing, but while you might find me up at 5am to go fishing, you’ll never find me caffeined-up and ready to shop at that time of day. Maybe Black Friday is defined less by gender and more by the American way. We’re competitive and like to win. And, after a year of economic suffering like we’ve had in this country, you can’t blame consumers for wanting to taste even a small victory.

But as any coach worth his salt will tell you, winning comes at a price. Unfortunately, the price of playing the Black Friday game reached an all time high in 2008 when a Walmart worker was trampled to death by a mob of shoppers at a store in Long Island. The repercussions have been strong and retailers are taking steps to calm the crowds and bring order to stores as the holiday season kicks off this coming Friday.

Walmart settled the lawsuits that followed with a nearly $2 Million payout to victims of the incident. Concern is so high that even the National Retail Federation (NRF) has released crowd management guidelines for its members hoping to prevent future disasters.

Consumers seeking ways to get ahead of the game have options. They can check out Top 10 Black Friday websites to find bargains in advance, or they can just sit at home after turkey dinner on Thursday and watch “what not to do” videos on YouTube ranging from Stampedes at Walmart to Scuffles at Target.

Outside of the fun that some people associate with the crazed energy of Black Friday, I have to wonder if retailers knew what they doing when they originally promoted the concept. Competing on price only leads to a “death spiral” of diminishing profit margins. And since there is usually only one acknowledged price leader in a discounting category (ahem, Walmart) the rest of the retailing pack might be much better off taking a higher road to open consumer wallets in their favor.

There have been some really good articles written about the violence of last year’s Black Friday, and academics such as  University of Delaware professor Sharron Lennon are now studying the human behaviors that lead to such incidents. There is also a groundswell of voices encouraging consumers to “Spend time together, not money”.

All of this makes me smile when people ask if Loyalty Marketing programs work. Yep, there are some lame versions of the concept out there, and even the good ones could make use of their data to be more relevant to their customers. But as a business owner, it should be attractive to preserve margins, improve the shopping experience, and justify repeat business at your store without having to fake a “going out of business sale” once a month.  Data-driven Customer Strategies do just that.

I’ll bet there are some forward thinking people at the NRF and among larger retailers that could change the paradigm. Maybe the time has come to return a bit of elegance and class into daily shopping experiences, not to mention air travel. And, retailers had better consider the impact of promoting mass shopping frenzy on Millennial (Generation Y) consumers shopping online at home from their PC’s.

Could it be time for Black Friday to “Go Dark”?

Black Cats, Black Magic, and Black Friday … sounds like a threesome to avoid.

But untold millions will be lining up the day after Thanksgiving in the wee hours of the morning with steely-eyed focus and adrenaline pumping – all with the almighty bargain in mind.

Maybe it’s a gender thing, but while you might find me up at 5am to go fishing, you’ll never find me caffeined-up and ready to shop at that time of day. Maybe Black Friday is defined less by gender and more by the American way. We’re competitive and like to win. And, after a year of economic suffering like we’ve had in this country, you can’t blame consumers for wanting to taste even a small victory.

But as any coach worth his salt will tell you, winning comes at a price. Unfortunately, the price of playing the Black Friday game reached an all time high in 2008 when a Walmart worker was trampled to death by a mob of shoppers at a store in Long Island. The repercussions have been strong and retailers are taking steps to calm the crowds and bring order to stores as the holiday season kicks off this coming Friday.

Walmart settled the lawsuits that followed with a nearly $2 Million payout to victims of the incident. Concern is so high that even the National Retail Federation (NRF) has released crowd management guidelines for its members hoping to prevent future disasters.

Consumers seeking ways to get ahead of the game have options. They can check out Top 10 Black Friday websites to find bargains in advance, or they can just sit at home after turkey dinner on Thursday and watch “what not to do” videos on YouTube ranging from Stampedes at Walmart to Scuffles at Target.

Outside of the fun that some people associate with the crazed energy of Black Friday, I have to wonder if retailers knew what they doing when they originally promoted the concept. Competing on price only leads to a “death spiral” of diminishing profit margins. And since there is usually only one acknowledged price leader in a discounting category (ahem, Walmart) the rest of the retailing pack might be much better off taking a higher road to open consumer wallets in their favor.

There have been some really good articles written about the violence of last year’s Black Friday, and academics such as  University of Delaware professor Sharron Lennon are now studying the human behaviors that lead to such incidents. There is also a groundswell of voices encouraging consumers to “Spend time together, not money”.

All of this makes me smile when people ask if Loyalty Marketing programs work. Yep, there are some lame versions of the concept out there, and even the good ones could make use of their data to be more relevant to their customers. But as a business owner, it should be attractive to preserve margins, improve the shopping experience, and justify repeat business at your store without having to fake a “going out of business sale” once a month.  Data-driven Customer Strategies do just that.

I’ll bet there are some forward thinking people at the NRF and among larger retailers that could change the paradigm. Maybe the time has come to return a bit of elegance and class into daily shopping experiences, not to mention air travel. And, retailers had better consider the impact of promoting mass shopping frenzy on Millennial (Generation Y) consumers shopping online at home from their PC’s.

Could it be time for Black Friday to “Go Dark”?

Sam Walton’s vision of creating a retail giant that would stock shelves with every day low priced items and crush the competition is still standing tall, even in a tough economy. They have managed to wipe out nearly all the competition and are looking to take out what’s left via Project Impact.

Project Impacts is in the beginning stages and represents a massive store and strategy remodeling effort. The result will be cleaner, less cluttered stores and friendlier customer service intended to improve the shopping experience. None of this is good news for competitors Kmart and Toys R Us.

Why is Wal Mart so successful?

The answer is quite simple and the company’s Northeast Manager Lance De La Rosa said it best in a recent article written by Time Magazine – “We’ve listened to our customers, and they want an easier shopping experience,” says De La Rosa. “We’ve brightened up the stores and opened things up to make it more navigable.”

One of the most noticeable changes is that Project Impact stores reshape Action Alley, the aisles where promotional items were pulled off the shelves and prominently displayed for shoppers. Those stacks crowded both the aisles and interrupted sight lines. Now, the aisles are all clear, and you can see most sections of the store from any vantage point. For example, standing on the corner intersection of the auto-care and crafts areas, you can look straight ahead and see where shoes, pet care, groceries, the pharmacy and other areas are located.

Maybe more important, discount price tags are still at eye level, so the value message doesn’t get lost.

As I read the article, the statement that “We’ve listened to our customers” stuck me as the most important element of Walmart’s success.  They listen to what their customers want and strategize to deliver – period. How many times do we hear what our customers want, but don’t act in turn as if we really listened?

Big Box retail pays big money for market research, customer surveys, polls and focus groups, but doesn’t seem to put the information to use often enough.  I suggest that Big Retail spend less time “wordsmithing” this message into company mission statements and focus on executing against the promises made. As many businesses are closing their doors, Wal Mart chugs along, widening their lead in a race they seem determined to win.

Hats off to Wal Mart as they implement this new merchandising strategy and read back customer needs in store design and operations.

A Mosaic is defined as a decorative art involving small pieces of glass, stone, or other material. It is an art form that represents the product of human creativity and captures the eye. Mosaics date back to AD 64 when In Rome, Nero and his architects used them to cover the walls and ceilings of the Domus Aurea. The size and color of each individual tessera, or small tile of stone or glass used to make a mosaic, is determined by the artist and it is unlikely that any two mosaics are exactly the same.

This aspect of singular design is shared by the proprietary planning methodology employed by Hanifin Loyalty to arrive at a Customer Loyalty Mosaic™ , a desperately needed and innovative approach to Loyalty Program design.  Any business with the will to listen to its customers and adapt its product or service offer to serve their needs is, in theory, on the road to success. To build long term brand loyalty and improve lifetime customer value however, a business must go further by matching transactional and qualitative customer data as the basis of a value proposition that is defensible and set apart from the competition.

Every business is capable of creating its own Customer Loyalty Mosaic™, the components of which range from brand message to operational efficiency, quality, and price. If you visualize the Customer Loyalty Mosaic™ (CLM) of familiar companies as a mix of shapes and colors, the idea takes shape.

Walmart’s CLM would emphasize tessera (elements) related to price and distribution, while Apple would have larger stones representing Innovation and Service. Federal Express might have larger components of Operational Efficiency and Distribution, while American Express would showcase Brand Message and Service.

In today’s difficult economy, it seems that the mosaic pieces of Service and Customer Satisfaction are increasingly in the spotlight. There is a unique challenge to consumer facing companies – do more with a diminished marketing budget and somehow meet the needs of customers who not only understand their value to the business, but carry a sense of entitlement about being recognized for their patronage. In other words, business is challenged to provide stellar service and more individual attention to customers when resources have never been more scarce, and work forces more skeptical about pitching in for the good of the enterprise.

Business Week recently chronicled this service phenomenon and noted that business resources are quietly being shifted to retain and delight more valuable (“best”) customers while deemphasizing acquisition plans. The magazine noted a renewed emphasis on segmenting customers by tiers and designing service and benefit packages customized to these tiers to improve retention. Business Week formed its own methodology to rank the top “Customer Service Champs” in 2009. Tops on the list was Amazon.com, followed by USAA, Jaguar, Lexus, and The Ritz Carlton in the top 5.

The trend towards customer retention and a more sincere approach to customer service is heartening as both are core elements of the Customer Loyalty Mosaic™. Loyalty Marketing is desperately in need of innovation. Let’s hope that the leadership exhibited by the companies on display in Business Week strike a chord for a more holistic approach towards building customer loyalty. Both consumers and business will benefit as these ideas filter throughout industry and, more importantly, have staying power as the economy improves.

“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 Hanifin Loyalty 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 small, 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