Loyalty Lab Blog

By Mickey Neuberger | Senior Director, Loyalty Strategy

In an effort to build deep customer relationships, organizations are increasingly hooked on requesting information from their customers. But some brands go overboard, leaving their customers to wonder why they bothered answering those questions in the first place.

For example, upon registration for a grocery club card, only ask “what’s your favorite vegetable” if you plan on sending the appropriate customers a discount on tomatoes the next day. And when customers call into your support center don’t prompt them to dial in their account number, phone number etc. just to have a customer rep re-ask those same questions a few minutes later.

Recently I had an experience with a brand that did it right. Upon arrival for a repeat hair cut at Great Clips, the hairdresser asked for my phone number. She then looked up my information and said “should we use the #4 clip and cut about an inch off the top again?” Now that’s value add.

Bottom-line brands that ask and then act on only the very critical customer questions win the respect of customers and provide superior service.

by Mark H. Goldstein | CEO

Whoops…it appears that Blackstone has found an elegant way to retreat from their super-pricey Alliance Data deal. They are blaming the Feds!!! Loyalty Lab competes/partners with various ADS companies and we’d ideally like to see ADS remain public as it enables us to watch them far more closely given the need for public reporting. That said, I never like to see folks have their deal fall apart, so I realize this is no fun for the ADS crowd.

ADS Says Blackstone Deal Unlikely

By ANDREW EDWARDS
January 28, 2008 8:46 a.m. (Wall Street Journal)

Alliance Data Systems Corp., just two weeks after assuring investors the deal was on, said Blackstone Group L.P. likely won’t go through with its $6.4 billion acquisition because of conditions being sought on the takeover by the Office of the Comptroller of Currency, a federal banking regulator.

The news sent ADS shares plunging in remarket trading, falling to $38.40 from Friday’s closing price of $65.60. The May merger deal values each share at $81.75.

Blackstone told the data processor and marketing firm in a letter late Friday it doesn’t expect the deal to get the necessary approvals from OCC and that the regulator is demanding “extraordinary measures” which “represent operational and financial burdens … that cannot be reasonably assumed.”

Blackstone “is unwilling to satisfy” the OCC’s requirements, said ADS, and the private-equity firm believes that “alternative solutions that would be acceptable to Blackstone would not satisfy the OCC,” making negotiations with the agency “futile.”

Alliance’s board is evaluating “possible course of action.”

The deal was slated to close at the end of 2007. By last week, Blackstone’s offer price represented a 40% premium on Alliance’s share price — a clear sign that markets were doubtful about the deal going through.

Several buyout deals have apart as the credit market has unraveled over the past few months. Leveraged buyouts, which were on the upswing when money was cheap, have been harder to work economically as investors have become wary of buying debt financing the deals. Recent buyouts by private equity firms which failed to be completed include SLM Corp. and United Rentals Inc.’s failed deal with Cerberus Capital Management.

by Mark H. Goldstein | CEO

Wow, lots of opinions circling about on this topic. I thought this post was a great ‘luddite-esque’ view of things, but one which I can a hard time refuting. Something tells me that the winners in Facebook advertising are going to be the smaller firms that dig in and solve the hard problems. Facebook is not a marketing firm and their DNA is not direct marketing, advertising or targeting. Their culture is that of a next-gen web portal rich in compelling features. My bet is Facebook fails at their own advertising plan, and instead uses that wacko $15 billion valuation to buy smart marketing companies that will figure it out for them—the way Yahoo bought Overture back in the day.

by Mark H. Goldstein, CEO

We’ve been spending a lot of time @ Loyalty Lab thinking about social networking and its relevance to loyalty programs. Seth Goldstein CEO of SocialMedia Networks conducting a webinar viewed by 000s, David Rosen put on a great seminar at the DMA (with Carlson Marketing) and Shop.org chatting about our clients Dell and others and what they are doing to blend the two…..the real fit is simple. Social networking is simply all about getting the right advice, the best recommendations, the…sex, best idea…from folks you most trust.

Fact is…consumers are more influenced by the recommendations of their friends than by marketing messages. According to a study conducted by The Nielsen Co., parent of Adweek, recommendations from others are trusted by 78 percent of consumers, while TV ads are trusted by 56 percent. Web ads fared even worse, with just 26 percent trusting them. Add a study released last week by WPP Group PR shop Burson-Marsteller. It found influential consumers-those most likely to share product opinions with friends and family-have a heightened wariness of commercial interests weighing in on blogs, message boards and review sites.

A brands best evangelists are those who have raised their hand and signed up to the brand’s loyalty or rewards program. It just intuitively makes sense. These brand evangelists are saying it’s OK to message me aggressively and its OK to provide me with incentives to buy more product because I WANT TO BUY MORE PRODUCT. So, its important a brand leverage these customers and have them speak out to their ‘friends’ across cyberspace.

This is why we are really thinking hard about bridging these two worlds. Your best new customer is likely to be referred by your happiest existing customers and with customer brand loyalty becoming a harder and harder thing to engender…we think owning and leveraging loyalty is awfully key…..

Mark H. Goldstein | CEO

John Deighton, the Hal Brierley professor at the Harvard Business School, has authored a seminal piece, titled “Digital Interactivity: Unanticipated Consequences for Markets, Marketing and Consumers.”

He states (and I agree) that social media and search marketing have created an environment where marketers have lost control of the message and the ability to control dialog. He argues that consumers control the information, spin and edits; the best that marketers can do now is seed a message and product to market and hope it sticks. I encourage everyone to read his article and I thank our direct competitor, Hal Brierley, for endowing this chair at Harvard and contributing to this thinking. Thank you Hal!

by Mark H Goldstein – CEO
Quick note on Offermaticas’s $65M acquisition by Omniture. Simply put, couldn’t happen to a better 2 guys; James and Matt Roche have been working on this company for a decade. First called Fort Point Partners, they built my webstore at Bluelight and they survived the dot.bomb (barely) and reinvented themselves as an A/B testing specialist. With 100 clients and a scaled business, its a perfect Omniture fit. Omniture contines to run away with web-side analytics for ecommerce-realted firms and this buy cements the distance between them and also-rans Coremetrics, Web Side Story and others. Note–We’ve shared offce space and furniture with Offermatica and right now I sit at a desk with a tag that says ‘Property of Fort Point Partners’.

by Joshua Tretakoff | VP, Client Services

One of the most frequent issues I see with our clients is their desire to differentiate themselves from their competition. I always advise them to do the same thing: boil it down to the basic reasons why a customer selects you, then use a combination of emphasis on those core values with a “surprise and delight” combination to really enhance the experience.

Case in point: can you imagine how hard it is to compete on something as basic as airport long-term parking? Think about it: all you have to work with is raw real estate and pricing. What else is there? Well, it’s surprisingly competitive. When I fly out of Oakland, CA, I usually park at Expresso Parking. Sure, they absolutely claim to have the lowest prices, but that’s just the start. They looked at the experience and focused on ways to enhance the experience.

First, I use their valet service: indoor parking, so no weather issues, and always right next to the waiting shuttle. Yes, it’s a few dollars more a day, but they offset that with a AAA discount and a $5 off coupon for providing them feedback on how they did, after the experience, so it cancels out for short trips. Next, as you get to the facility, they greet you grab your bags out of your car, and transfer them to the shuttle, without any delay. There’s a place to grab a free cup of coffee, as well as a complimentary muffin, should you choose. Head onto the shuttle, and the driver politely asks if you’d like a copy of the day’s paper for your flight. In 5 minutes, you are at the airport, stress-free.

On your return, it’s even better. The shuttle (fast, friendly, clean) picks you up, and the driver asks for your valet ticket. 5 minutes later, you arrive at the brightly lit facility, where your car is waiting for you, mere feet from the exit of the shuttle. It’s been washed, and cleaned, and a sealed bottle of spring water is placed in your cupholder. You can pay at the human cashier, or use their automatic machine (it even reads your AAA card to apply the discount). Finally, a thank you note is in the car, inviting you to visit their special site to provide feedback and get a discount on your next stay.

This company looked at the core of the experience, and focused on it’s dehumanizing aspects. They figured that, if they could introduce some creature comforts and some nice touches, they’d carve a unique niche in a swollen environment. By adding in the feedback mechanism, they almost immediately seduce you into loyalty: you know they have a financial stake in their success, so they will more likely make sure your comments reflect changes or improvements. They even offer a frequency loyalty program on top of it, to really try to make sure they are appealing to all customers. This is the fanatical focus that makes them stand head and shoulders above their competition: pull in with the basics, but keep with the elevated experience.

by Joshua Tretakoff | VP, Client Services

I normally don’t comment on specific clients, but I’m looking forward to the launch of our newest one, Hawaii Superferry. They’ve really taken the best aspects of frequent flyer programs, and applied it to one of the most anticipated new travel services.

HSF operates a jet powered 350 ft. ferry between the Hawaiian Islands. It carries cars and trucks, and offers transit times that only planes can match, but with the conveniences of luxury ship travel.

When they focused on their program, they looked at what their customer appreciated: early boarding, special access to an exclusive lounge, and special treatment for the kids. They looked at the advantages they had in their kind of inter-island service over planes, and made those even better for elite customers. In short, they looked at their business, their market, and their customers, and designed a program that meets all of their needs.

Should be a fun ride!

by Mark Goldstein | CEO

GE Money announced http://www.myearthrewards.com/.

Hats off to them, it’s a great pure-play idea (although personally I don’t think it has much of a shot to survive as Americans are simply too selfish to direct their discounts to charity when the alternative is getting a deal themselves). The signup and UI is wonderful as is the value prop. But, they only offer 1% to the environment or half of 1% if you want to take 50% of the rewards yourself. This strikes me as a bit selfish as 1% is the give-back loyalty program floor. Why can’t GE do better and figure out how to match customer savings to kickstart the program. Once I see that, I’m going to use this card…..

by Mark Goldstein | CEO

The future looks good for loyalty as the economy downshifts….if Southwest cuts flights and planes but ups its loyalty program…..its likely a harbinger for what others will be doing….

Southwest to Cut Some Flights
By ANN KEETON
June 27, 2007 12:15 p.m.

CHICAGO — With revenue growth slowing this year, Southwest Airlines Co. said Wednesday it will cut back on expansion plans for the fourth quarter and for 2008.

“We wanted to give ourselves a little insurance to boost our profits in the fourth quarter,” Gary Kelly, chief executive, told analysts in a presentation that was broadcast over the Internet.

To get closer to its long-stated goal for average annual profit growth of 15% each year, the leading U.S. low-cost carrier will trim fourth-quarter capacity growth to 6%, down from its earlier plan to grow 8% in the quarter. Southwest will eliminate 39 roundtrip flights, including many of its longer flights, while adding 45 new roundtrip flights in growing markets like Denver and New Orleans. The Dallas airline also plans for 6% capacity growth in 2008.

Speaking to analysts at the New York Stock Exchange, Mr. Kelly said the carrier still sees second-quarter passenger revenue coming in below a year ago. He said passenger traffic this summer is stronger than expected, mainly due to leisure travelers. But he said business travel is growing more slowly, in line with U.S. economic growth.

In 2008, the airline will reduce capital spending by “several hundred million dollars,” cutting planned growth of its 500-plane fleet of aircraft by 15 aircraft. That could include deferring new deliveries or returning leased planes. “With the economy slowing the way it has, we think this is the right thing to do,” he said.

Southwest is also reviewing growth plans for 2009 and 2010, Mr. Kelly told analysts. In Southwest’s “transformation plan” to add new revenue while keeping costs in check, Mr. Kelly said that “Our greatest opportunity lies with the business customer.”

Southwest stands by its long-term earnings growth plan, although the airline may not meet that goal every year, Mr. Kelly said. He added that the airline needs to be “very wise” in managing its labor costs. Southwest, which last year overtook American Airlines, a unit of AMR Corp., as the largest carrier of domestic air passengers, this year is facing rising costs for fuel and labor — the greatest expenses for all airlines — and stiffer competition.

Celebrating the Dallas carrier’s 30th anniversary as a stock listed on the New York Stock Exchange, Mr. Kelly on Wednesday said the company will pursue the aggressive transformation plan, while continuing its core strategy to be “an efficiency machine.”

In midday trading on the New York Stock Exchange, shares were trading at $14.82, up 1.2% and close to the 52-week low of $14.03, set June 6.

During the five-year airline industry downturn after the Sept. 11, 2001, attacks, Southwest remained profitable every year, thanks to aggressive fuel hedging. But hedges have gradually been coming off, even as jet fuel prices have gone through the roof. In 2006, Southwest paid 47% more for fuel than in 2005. Meanwhile, other U.S. airlines in recent years have substantially cut their costs, especially for labor, and new low-cost carriers have sprung up.

So far in 2007, the U.S. airline industry has been profitable, even though jet fuel costs have risen. But carriers this year have seen slower growth in yield, or revenue per passenger. JetBlue Airways Corp., a fast-growing low-cost competitor, said earlier this year it would slow capacity growth to focus on profitability.

Until now, Southwest has continued to advocate growth to pick up new market share. Mr. Kelly reiterated that Southwest is considering adding new sources of revenue, including code-sharing with other airlines and more sophisticated revenue management. He said the airline expects to add more than $1 billion of new revenue per year by 2010.

Southwest is looking at charging passengers for assigned seating and onboard Internet access. Prototypes for Internet use will be in service next year, the executive said Wednesday. He added that a decision regarding assigned seating will be announced later this year. That would reverse the airline’s previous philosophy, which hasn’t included add-on charges for meals or other services. “Our model isn’t broken, it’s just a little bent,” Mr. Kelly said.

The carrier is gearing up to add service outside the U.S., most likely by forming partnerships with other airlines. Southwest already has a successful code-sharing deal with ATA Airlines to fly to Hawaii and Mexico. That agreement is likely to be expanded as Southwest brings new technology onboard by 2009 to accommodate international ticketing and other back-office operations. Mr. Kelly said the company also will enhance its frequent-flyer program, supported by a new marketing campaign.

Mr. Kelly said Southwest will remain flexible as it pursues long-term growth. “We have to be open to all possibilities” for expansion, Mr. Kelly said, including adding more aircraft to its 500-plane fleet, making acquisitions, or ramping up code-sharing agreements with other carriers.