Loyalty Updated

RELATIONSHIP MARKETING MOVING FORWARD:
EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGN

FOR JOHNSON & JOHNSON

RAPP

RELATIONSHIP MARKETING MOVING FORWARD: EVOLVING LOYALTY PROGRAMS VIA BRAND EXPERIENCE DESIGN

TABLE OF CONTENTS
4 INTRODUCTION: A NEW PARADIGM IN RELATIONSHIP MARKETING

10 21ST-CENTURY BRANDS DEMAND NEW BUILDING BLOCKS

12 DESIGNING BRAND EXPERIENCES:
I) THE NEEDS-BASED JOURNEY: A BLUEPRINT FOR BRAND EXPERIENCES
II) INTEGRATING BRAND “THINK” AND “DO:” LOYALTY MARKETING ACTIVATES THE BRAND BELIEF
III) NURTURE ACTIVE LOYALISTS: MUCH MORE THAN SOCIAL MEDIA

33 TRENDS IN DATABASE MARKETING: ACTIVATING AND MEASURING BRAND EXPERIENCES

39 ANNOTATED BIBLIOGRAPHY

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“The well-documented connection between customer loyalty and profit
margins has encouraged many companies to launch so-called loyalty
programs, using incentives or contracts to ‘lock in’ customers. Trouble
is, customers don’t like to be locked in. It makes them disloyal. Not only
that, loyalty programs are expensive to manage and easy to copy.”

Marty Neumeier, The Designful Company

“Marketers need engagement to create long-lasting brand relationships,
but how should they try to create these – and with whom? Traditionally,
loyalty programs have provided transactional interactions with
customers. But marketers who embrace social loyalty – brand affinity
built on the connection of consumers to the brand as well as to each
other – can use it to move their loyalty programs from mercenary
rewards to a portal for identifying, creating, and nurturing high-value
customers.”

Lisa Bradner, Forrester Research2

INTRODUCTION: A NEW PARADIGM IN RELATIONSHIP MARKETING
As the communications landscape continues to redefine how people purchase products and services, relationship marketing
practices such as loyalty programs must be reinvented from a much broader perspective. Traditionally, loyalty programs
have been built on foundations designed for 20th-century marketing. These are rooted in product-centric opt-in programs that
reward transactions and are supported by one-way communications focused on rational value propositions such as
discounts, gift with purchase, points, and the like. Industry data widely documents the benefit of at least complementing
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coupon or points-based programs with a more comprehensive approach.

Recent Forrester research shows that when compared to non-subscribers, those who subscribe to loyalty programs exhibit
more intense mercurial consumption patterns such as price-based decisions, comparison-shopping, and others. This is true
in most classic loyalty categories and markets such as retail (see figure 1), hospitality, and travel. At face value, the data
indicates that when this approach becomes the sole focus of the relationship marketing organization, it tends to drive
behavior that is detrimental to long-term business.

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Figure 1: Loyalty Program Subscribers’ Shopping Habits

WAIT UNTIL ITEMS GO ON SALE

SEARCH FOR AND USE ONLINE
COUPONS
DO MORE RESEARCH ONLINE TO
GET BEST PRICE
TRY LOWER COST ALERTNATIVE
TO THE BRANDS I BUY SUBSCRIBERS

USE SEARCH ENGINES AND NON SUBSCRIBERS
COMPARISON SHOPPING SITES

0% 10% 20% 30% 40% 50% 60%

Source: Forrester

In order to really appeal to today’s customer needs, modern relationship marketing programs must evolve and complement
the traditional focus on transactional loyalty with reward systems that address emotional needs often related to social
consumption and a reputation economy amplified by digital media. Wikipedia’s definition of relationship marketing offers an
excellent point of departure:

“… a long-term and mutually beneficial arrangement wherein both the buyer and seller focus on value
enhancement with the goal of providing a more satisfying exchange. This approach attempts to transcend the
simple purchase-exchange process with customers to make more meaningful and richer contact by providing
a more holistic, personalized purchase, and use the consumption experience to create stronger ties.”

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This definition is today more relevant than ever as modern consumers demand a more purposeful approach to marketing,
one that is focused on their needs and their communities and that consistently adds value at every stage of their journey. A
“long-term and mutually beneficial arrangement” between brands and increasingly more sophisticated consumers requires
“value enhancements” that transcend the transactional space.

Only multidimensional brand experiences can “transcend the simple value-exchange process with customers to make more
meaningful and richer contact” that rewards customers and advocates holistically while contributing to build true brand equity.

Broad access to information in a connected environment facilitated by social media channels drives complexity when it
comes to adding true value and rewarding transaction, engagement, and other important brand-consumer and consumer-
consumer interactions. This reward system can be synthesized in four areas (see figure 2) going from transactional loyalty
rewards to emotional loyalty rewards:

1. Transaction: Transactional rewards are the basis of most loyalty programs, they appeal to the most basic value
exchange and even though they can be easily replicated, they can also drive trial and temporarily break through
mercurial consumption.
2. Individuality: Rewarding program engagement (opt-in communications, survey completion, etc.) with
personalization is another common feature of loyalty programs and in most cases is expected by consumers. This
has most value when closely tied to a status system that rewards the most valued customers with access to better
service, more features, etc.
3. Community: Rewarding active loyalty (participation in community or advocacy initiatives) with social capital (e.g.
public recognition, access to social filters, peer reviews, etc.) starts to build a sense of belonging that is essential for
deeper brand loyalty. These rewards also recognize the fact that active advocates can be as important (if not more)
to the brand as high-status customers that are not well connected and/or influence their social circles.
4. Co-Ownership: Rewarding the most valued customers (either due to status or advocacy potential) with a stake in
the brand motivates consumers to become part of a common enterprise. Their reward is symbolic capital (e.g. be
the first to know, perceived reputation enhancement, etc.) which has an important value in today’s reputation
economy.

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Figure 2: Transactional and Emotional Loyalty Reward System

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“Our goal is to take this beyond transactional loyalty
to create emotional loyalty and brand love.”
Michael La Kier, director, My Coke Rewards, Coca-Cola North
America, in an interview with eMarketer, November 17, 2009.

MY COKE REWARDS: BEYOND TRANSACTIONAL LOYALTY
At its worst, transactional loyalty intensifies disloyal behavior, as it emphasizes hard currency (e.g. points, coupons) as the
key benefit in the brand-consumer relationship. At its best, transactional loyalty uses hard currency as a method to create
community and drive relevance in the context of key brand beliefs. That is the case of Coca-Cola Co.’s My Coke Rewards
program, which offers consumers the opportunity to redeem points after opening an account at mycokerewards.com.

My Coke Rewards uses hard currency as a stepping-stone for a meaningful brand experience that departs out of Coke’s
brand belief of promoting happiness. While participants (eMarketer reports over 13 million members) can redeem their points
for brand-relevant gifts such movie tickets, photo books, and the like, they can also donate points to local causes (e.g.
elementary schools) and connect with other members who contribute to similar organizations.

Beyond cause marketing, Coke also gives its most loyal customers a stake in the brand through the opportunity to
contribute to package design and other similar initiatives via My Coke Rewards. In the summer of 2009, Coke Classic
launched a can design competition which drove nearly 35,000 designs and served as the basis for content sharing activities
across multiple social media platforms beyond mycokerewards.com. Coca Cola recognizes that brand loyalty must evolve
beyond transactional loyalty, and in doing so employs transactional loyalty as a point of departure for a deeper brand
experience that sits at the intersection of community, content, and commerce, and actively contributes to build brand equity.

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QuickTime™ and a
decompressor
are needed to see this picture.

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21ST-CENTURY BRANDS DEMAND NEW BUILDING BLOCKS
The new communications landscape continues to put pressure on all marketing disciplines when it comes to contribute to the
overall brand equity. Modern relationship marketing thinking cannot be divorced from the overall brand building effort. In the
recent past, brand building has been relegated to a predetermined set of mass media channels. Today, we have a better
understanding of the levers that drive brand equity of which brand experience plays an increasingly important role.

Relationship marketing must contribute to brand equity (and therefore to the bottom line) through positively impacting key
levers via a customer-centric brand experience approach consistent with the core principles of design thinking. This can be
achieved through employing three basic building blocks:

1. Establish a needs-based journey: Deep understanding of customer needs throughout their journey and
how changes in external environment impact them.
2. Integrate brand “think” with “do”: Successful loyalty programs ultimately become brand experiences
consistent with core brand belief.
3. Nurture communities of active loyalists: Optimize the marketing dialogue to share brand ownership
with diverse groups of active loyal customers. Inspire passive loyalists to become active.

FOCUS ON BRAND EQUITY
Brand equity is driven by a number of brand assets and is directly associated with strong business performance. Proprietary
research from RAPP as well as various studies from McKinsey, QSA Research, Forrester, and others converge in several
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drivers of brand equity which we synthesize in four levers:

1. Industry leadership: Directly impacted by management’s commitment to innovation. Those brands
perceived to be in a solid leadership position enjoy an advantage in a highly competitive environment and
during times of financial duress.
2. Product quality: Also directly impacted by the organization’s ability to out-innovate competitors and offer
a consistent experience.
3. Brand belief: This is driven by the brand’s purpose in society. What problem is the brand solving?
Successful brands have a strong belief or position that is articulated consistently throughout all channels.
Brands that effectively communicate a relevant belief have a higher rate of success in establishing a
positive and fresh image.
4. Brand behavior: Driven by the brand belief, this is how consumers experience the brand throughout
their journey. Strong brands can identify value gaps in the customer journey and address them in
imaginative ways. Modern loyalty programs are expressions of brand behavior.

The following illustrates how these principles can impact loyalty and overall marketing communications strategy while directly
contributing to strengthening the drivers of brand equity.

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Consumers are loyal to Customer needs in the post- Addressing real needs
brands that continuously purchase experience can throughout the journey leads
evolve to answer their needs. often lead to product to a better customer
Netflix offers a relevant innovation or product experience in sometimes
example as the brand that extension ideas that unexpected ways. For
not only reinvented the maximize customer loyalty. example, a McKinsey study
category – by answering This is most evident in the on needs-based marketing
consumer demand on two weight-loss industry that has identified that “more than 60
levels: 1) using the internet to developed behavioral support percent of consumers of
order movies while using programs to address value facial skin care products… go
mail for DVD handling, and 2) gaps in the customer online to conduct further
using data analytics to experience (education, peer research after the
improve movie selection – support, and the like). These purchase…” Addressing this
but that also continues to programs are an integral part need not only drives loyalty
develop new and relevant of both loyalty strategy and via a better experience but
products via integration with product quality. contributed to brand equity.
Sony Playstation 3 and
stand-alone digital box.

Modern loyalty programs are
in reality comprehensive
brand experiences that bring
to life the brand position or
belief via interactive features
and services. The Italian
brand Fiat offers a great
example with its Eco:Drive
program in Europe, which
offers customers a device to
assess their driving style in a
community setting while
offering personalized
techniques, to minimize fuel
consumption. This program
not only drives loyalty but
also brings to life Fiat’s brand
promise of fuel-efficiency in a
unique and relevant manner.

Differentiating the brand via While the Starbucks example Even a well-established, well-
an outstanding brand also applies to this driver (the entrenched company like
experience not only builds brand has effectively Kraft Foods realizes that not
loyalty but also requires a implemented a wide number only do today’s consumers
commitment to innovation. of advocate-driven ideas), want a stake in their favorite
This in turn drives the whole there are other initiatives that brands – but that they can
organization to consider have been designed to work actually help their brands
loyalty marketing as a harder for product quality perform. Kraft has set up an
catalyst for improved improvement as opposed to entire – secure – innovator
experiences, brand sharing focus with brand site to allow its consumers a
extensions, and new brand listening and community chance to co-develop
behaviors that often offer a discussion, as Starbucks products. The company’s
service to consumers. This is effectively achieves. Lego Vegemite brand, better
a constant in most category offers a better example of known in Australia, shows
leaders and successful comprehensive product that consumer involvement
challengers. It is easy to see quality improvement and with updating the recipe for a
how “My Starbucks Idea” innovation via activating its ‘leaner/healthier’
contributes to loyalty via most loyal advocates, from contemporary audience has
sharing brand ownership with non-professional consumers lead the brand to resurgent
active advocates at the same via Lego Factory to engaging 25
sales and popularity.
time that it contributes to professionals and amateur
Starbuck’s leadership programmers via Lego
position as it drives a Mindstorms, the brand offers
tangible, better experience. a sophisticated platform for
consumers to develop a long-
term profitable relationship
while actively contributing
with product quality.

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DESIGNING BRAND EXPERIENCES
As sources of information continue to diversify limiting the brand’s ability to consistently communicate with and, more
importantly, add real value to its customers, marketers must carefully design brand experiences that balance push and pull
marketing while address tangible consumer needs inspiring active loyalty.

The first step in the process is to establish a needs-based journey that can act as an organizing principle for meaningful
brand experiences.

I. THE NEEDS-BASED JOURNEY: A BLUEPRINT FOR BRAND EXPERIENCES
In a study of the “consumer decision journey,” a group of McKinsey principals explain how “the funnel concept fails to capture
all the touch points and key buying factors resulting from the explosion of product choices and digital channels, coupled with
the emergence of an increasingly discerning, well-informed consumer.” The study argues for a more comprehensive set of
guiding principles that take into consideration new information-seeking behavior and a fundamental shift in the decision-
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making behavior that leads to purchases.

Data from Forrester, IBM, Trajectory, and others confirms this assessment and further highlight the need to rethink the funnel
to incorporate not only information-seeking and active evaluation behavior but also the impact of social media, cross-media
shopping, and other emerging and already mainstream trends that have decisively reshaped purchase behavior and
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therefore brand loyalty.

At RAPP, we have organized these principles and requirements in a four-stage needs-based journey (see figure 3) that has
been successfully applied to a wide range of industries, from retail to consumer packaged goods to automotive, healthcare
and entertainment.

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Figure 3: Needs-Based Journey

Today’s marketers are beginning to understand the importance of a consistent brand experience throughout this journey. For
example, Procter & Gamble focuses on the category-generic information-seeking behavior that occurs at the Point of
Departure phase among young women in the feminine-care space to address specific needs via BeingGirl.com.

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BEINGGIRL.COM: ADDING VALUE TO YOUNG WOMEN VIA FACILITATING CATEGORY-RELEVANT DISCOVERY AND EVALUATION
Launched in 2000, BeingGirl.com offers an excellent example of a loyalty platform that accelerates behavior by addressing
needs at the beginning of the customer journey (teen girls want information but are embarrassed to discuss with adults) and
facilitating the evaluation process expected in Discovery and Evaluation phase in an environment that creates an advantage
for P&G brands.

With over 400,000 unique visitors per month, extremely high cross-visitation with Procter & Gamble brands (e.g. 500x more
likely to visit Tampax.com per Quantcast estimate in November 2009), and high levels of engagement (36% are regular
visitors, 23% “addicts” per Quantcast) this initiative is addressing a real need and accelerating the behavior of qualified
customers through the journey.

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COMCAST: DIVERSIFYING MARKETING INVESTMENT TO EXTEND THE BRAND EXPERIENCE
Comcast, on the other hand, has developed a variety of needs-based programming for its customers centered primarily on
the brand experience cycle.

Traditionally, cable company brand behavior has aligned in step with that of telephone companies – behaving as regulated
monopolies, taking their consumers for granted. Because of deregulation, however, cable companies were forced into a new
world of competing for customers, and that means major adjustments in corporate culture and brand behavior.

Comcast, based on its efforts to more closely align with their consumers (described below), has become a corporate role
model in terms of brand behavior and taken a leadership position in its category.

SUPPORT
As a technology-based company, Comcast has embraced social media to dialogue real-time with
its customers. Via the handle Comcastcares on Twitter, the brand has more than 35,000 followers
who dialogue with a dedicated, real-life company representative.

Comcast customers – who at times have shown concern with the company, in terms of service,
pricing, etc. – now express confidence in their cable company.

In fact, the flowing exchange of information between company and consumer, and even potential
consumer, has become a source for pride for the brand.

Consumers are enabled. Facilitated by the brand platform, consumers help each other solve
service problems, offer tips, and provide solutions.

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UNDERSTANDING
Along a different path in the brand experience cycle, Comcast has developed a digital
entertainment platform called Fancast.com to service the needs of a growing segment of its
consumers who watch their television through the Internet.

Fancast offers Comcast cable subscribers the chance to watch their programming on demand and
wherever they want – they’re no longer tethered to their television set.

Fancast also provides consumers with a library of both current and historical television shows and
movies. The site receives about 2.5MM visitors each month, who receive the freedom and control
they want in watching their television shows.

Comcast CEO Brian L. Roberts recognizes that to connect with consumers is to align with their
needs, and is positioning his company to “give consumers choice, becoming a leader in the
development of multiplatform ‘anytime, anywhere media’ that American consumers are
demanding.”

DEPTH – INVOLVEMENT – CARE: COMMUNITY CONNECTION
Community involvement is a third platform where Comcast has made an investment to reach the
needs of its consumers. We argue corporate citizenry in the telecom category plays a more
important role in terms solving the emotional ‘community/paternal’ needs of its consumers.

Comcast’s investment of more than $1.4 billion to connect and build relationships with local and
national non-profit organizations, including the National Urban League, National Council of La
Raza, and Big Brothers Big Sisters, shows its customers its commitment to the well-being and
improvement of the community it serves.

A particular area of focus is the company’s sponsorship of foundations aimed at providing
leadership, education and digital literacy programs.

Comcast Cares Day is the company’s largest nationwide community-service effort, with 60,000
Comcast employees volunteering in one single day.

BUILDING A LEADER
Overall, Comcast’s diversified efforts in loyalty marketing, centered around the brand experience
cycle, have helped the company grow to a base of over 23MM US subscribers, take on a
leadership position in the category, and enable an acquisition of one of the country’s television
broadcast pioneers in NBC Universal.

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RETAIL TRENDS //
NEEDS-BASED JOURNEY
Online collaboration and social tools challenge
retailers to rethink their role and nature of the
physical spaces they create to captivate their
customers. Mobile and internet are seen as
enhancing and empowering tools that blend the
two worlds together. Consumers want to make
informed purchasing decisions, and they lean
towards trusting the opinions of their peers over
advertising or salespeople. Consumers need
access to this information, so many retailers are
taking steps to not only simplify access but
enhance the experience when doing so.

SHOPSAVVY VERIZON

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MOBILE SHOPPING APPS
A major consumer trend while shopping is to use mobile devices to access information. Whether consumers are on the go
looking for a store location, searching for product information and reviews, or trying to access their personal networks to seek
rd-
input for their purchase decision, the phone has become an important shopping tool. There are a number of retailer- and 3
party-developed applications built to help facilitate this process in a more consumer-friendly way.

ShopSavvy
The ShopSavvy mobile application uses the phone’s camera to ‘scan’ the barcode of any product to find the
best prices on the internet and at nearby, local stores. You can also read online reviews and save scanned
items to a wish list to purchase them later or receive price-update alerts.

Sephora – MobileVoice App
Sephora found research that 92% of consumers have more confidence in information they seek out online
than in insights from a sales clerk. They developed MobileVoice to provide easy access to the reviews from
their online store to shoppers who were in their physical store. “It’s like having all your best customers advise
all your in-store shoppers.”

MERGING E-COMMERCE WITH PHYSICAL SHOPPING
Many brands have both physical and e-commerce store presence, and cross-channel shoppers who purchase offline will
likely research online prior to coming to the store. Leveraging online tools and experiences within the physical store brands
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not only brings familiar online shopping elements offline but can create convenience.

Apple Retail Stores
A brand experience in-store ends with checkout; long waits can taint an otherwise positive experience. When
you walk into an Apple Store the lines appear to be long but they move surprisingly quickly. Store employees
are equipped with an iPod Touch that features a mobile checkout application that can process payments and
email receipts directly to the customer. Not only does this speed up checkout, but there’s the added
convenience of never having to worry about losing your receipt.

Verizon Retail Stores
Verizon links the online interactive store finder to an in-store experience with their interactive displays.
Consumers in the store can use the display to search through plans and phones, customize a plan based on
your area, check coverage maps and pricing information. Since all the data is linked to a central database,
store employees can be sure to be up to speed on the latest product information and promotions.
!
!
!
!

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II. INTEGRATING BRAND “THINK” AND “DO:” LOYALTY MARKETING ACTIVATES THE BRAND BELIEF
Today’s marketing requires brand to go well beyond positioning and into actually having a position. The key questions to
answer are: What is the purpose of the brand in culture? What human problem is the brand solving? These answers will
elevate the brand into a set of values or beliefs that should dictate how the brand behaves through programs or platforms.
Inconsistency in this area is the most common shortfall among most loyalty programs, leading to sub-par performance and
less-than-ideal contribution to brand equity.

Beyond the few celebrated brand experience platforms such as Nike+, and Fiat Eco:Drive, there are a few examples of
brands in more challenging categories (such as CPG) integrating their “think” and “do.” Frito-Lay offers one relevant case
study via its “permissive indulgences” initiative.

Rooted in the belief that snacking should make you feel good, not guilty, Frito-Lay invested significant resources in a wide
variety of product-innovation and brand-experience platforms to support its women’s portfolio of brands that include Baked,
SmartFood, Sun Chips, and Flat Earth. The combined effort goes all the way from actual products designed for women (e.g.
100 calorie packs) to multi-channel brand expressions ultimately aggregated in the website awomansworld.com.

The platform, Only in a Woman’s World, has all the ingredients of loyalty programs (registration, personalized email stream,
community). However, unlike most loyalty programs it brings together these elements via a common theme between
customers and brands in a way that facilitates a lifestyle that delivers on the brand belief of feel-good snacking.

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Frito-Lay’s initiative also stands out in its ability to marry true entertainment with practical information and community. It
effectively plays at the intersection of content, community, and commerce, driving true loyalty while contributing to brand
equity. The wide success of this platform is multidimensional and goes well beyond site visits and into an active Facebook
community, earning a space in the top 10 viral videos of several charts, and a thriving following in Twitter. Most importantly,
the brand now enjoys a community of active loyalists that share a common point of view and can fuel future initiatives.

ZAPPOS: DELIVERING WOW
Zappos CEO Tony Hsieh sees customer service as an investment, not an expense. The return on investment – happy
customers spend more money on their future purchases, and give you free (earned) media by telling their friends how much
they love you. Zappos didn’t make the choice to invest in service after crunching the ROI numbers; it’s a core belief that has
driven the company since the beginning. They call it delivering WOW.

SERVICE CULTURE
Zappos is not a shoe company. In fact, they don’t really call themselves a retailer. They are so obsessed
with pleasing customers that they call themselves a service company – that just happens to sell shoes,
handbags, clothing, eyewear, accessories, and eventually much more. Zappos CEO Tony Hsieh states
their “#1 objective is to establish a great company culture. If you do that, all the other stuff falls into
place.”

But Zappos’ success is not built on the culture alone. The other piece of the equation is how they manage
relationships and their brand across all touchpoints to make sure that every customer interaction is one of
quality and lives up to the brand’s values. These interactions can be the experience of purchasing on the
site, trading tweets with Tony or other Zappos employees, calling into the call center, or following as a fan
on Facebook.

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IT STARTS WITH VALUES

Zappos has 10 they live by:
1. Deliver WOW Through Service
2. Embrace and Drive Change
3. Create Fun and A Little Weirdness
4. Be Adventurous, Creative, and Open-Minded
5. Pursue Growth and Learning
6. Build Open and Honest Relationships With Communication
7. Build a Positive Team and Family Spirit
8. Do More With Less
9. Be Passionate and Determined
10. Be Humble

LIVING THE VALUES
At Zappos, customer-service employees don't use scripts and aren't pressed to keep calls short. Every
new hire spends four weeks as a customer-service rep and a week in the Kentucky warehouse before
starting work. Then, about one week into the job, Zappos makes what it calls "The Offer," telling newbies,
"If you quit today, we will pay you for the amount of time you have worked, plus a $2,000 bonus." In a
BusinessWeek interview, Hsieh said only 2% to 3% of people take the offer. The other 97% say no deal
— they choose the job over the instant cash. The result – a service staff that perpetuates the culture
of customer obsession.

TRANSPARENCY
“I think people worry too much about bringing their personal selves into business, when I think the way to
succeed in today’s world is to make your business more personal. Twitter is also a great way of doing
that.” Tony Hsieh, CEO.

Zappos features employee and brand tweets
on subdomain twitter.zappos.com. There are
over 400 Twitter employees whose updates
appear on this page. Sometimes they tweet
about Zappos, sometimes just about
themselves, their personal interests and lives.
Their only guideline – use your best judgment.
The result is that the tweets give you a
glimpse of the culture and lives of the people
who work there. Not only does this
transparency help the Zappos culture
permeate out, but it’s important for building
trust. Trust is essential for building loyalty.

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WOW’ING WITH SERVICE
Zappos understands that a WOW experience with the brand can happen at any point, from browsing the
site to calling in about an issue with your order. Free shipping, a 365-day return policy, and a 24/7 call
center are great, but there’s more that sets Zappos apart and has people talking, and coming back.

WOW LEADS TO REPEAT PURCHASE
On any given day, 75% of purchases are from returning customers, and the average customer orders 2.5
times over the course of 12 months. Not only are the customers coming back, the size of their basket is
increasing from $111.98, on their first purchase, to $143.22. WOW the customers and they’ll “come back,
order more and order more often.”

WOW LEADS TO WOM
Until very recently, Zappos didn’t advertise on TV. In fact, only
15% of their advertising is spent offline. The remainder is spent
online. But what’s been critical to Zappos growth to a $1 billion
company in 10 years is what they don’t pay for; it’s what they’ve
earned through word of mouth. Zappos doesn’t strive to deliver
good service, they strive and deliver WOW service. And when
they do, people tell others. Zappos shared customer acquisition
numbers, which showed that 43% of new customers were
acquired through WOM. When you give people a reason to love
you, it pays.

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RETAIL TRENDS //
INTEGRATING BRAND “THINK” & “DO”
!
Modern loyalty programs are in reality comprehensive
brand experiences that bring to life the brand position or
beliefs via interactive features and services. Brands are
now finding ways to improve in-store engagements that
bring brand beliefs to life, connecting with consumers on
a level deeper than the products themselves.

!
!
!
!
STARBUCKS
! METHOD
!
!
!
!

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SOCIALLY RESPONSIBLE STORE DESIGN
If a brand believes in sustainability, shouldn’t this belief be reflected in the stores themselves? Not only through efficient uses
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of energy and waste, but the elements used to build the stores.

Starbucks
Starbucks believes in doing “things that are good to each other and the planet. From the way we
buy our coffee, to minimizing our environmental footprint, to being involved in local
communities.” They have ethically sourced coffees. They take steps to reduce carbon footprints
with 100% reusable or recyclable cups, and have sights aimed on 2015 to have recycling
available at 100% of their stores. One of their most recent initiatives has been to apply these
beliefs to store design and materials sourcing. Starbucks has concept shops in Seattle that are
designed to be more energy efficient, and built from locally sourced and produced materials.
The new design strategy will cost incremental dollars that would have otherwise been saved
through the manufacturing economies of scale they’ve benefited from in the past.

STORES AS BRAND FORUMS
Just as brands create online experiences to engage with consumers through shared beliefs, store experiences can position
the brand as more than just a product, and offer a positive impact on consumers’ daily lives. 34

Method
Method sells natural cleaning products for “people against dirty.” They set up a pop-up shop in
New York that was a physical manifestation of what the brand believes in. Experts offered
advice on eco-cleaning. They hosted organic cocktail classes and eco-craft parties. They even
had a confessional booth where guest, could cleanse themselves of ‘dirty cleaning secrets’ by
writing their sin on a whiteboard and holding it up for a picture. Method encouraged people to
bring in their toxic cleaning products and trade them in for a free Method product. The
experiences and events were tied to beliefs and not always to the products themselves.

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III. NURTURE ACTIVE LOYALISTS: MUCH MORE THAN SOCIAL MEDIA

“Every day, millions of people make all kinds of voluntary contributions
to companies – from informed opinions to computing resources – that
create tremendous value for this firm’s customers and, subsequently, for
their shareholders.”

Scott Cook, Intuit founder,
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board member P&G, eBay, Amazon

At RAPP, we have engaged and nurtured active loyalists in different industries as part of broader marketing efforts, and with
excellent results (e.g. propelled Travel Channel to the top of branded Facebook applications via a Social Gaming initiative,
engaging a new audience, and driving more eyeballs than any other marketing tactics). In our experience, success in this
area is driven partly by the marketer’s ability to create a coherent platform in which active loyalists have a clear role, and
partly by following two essential principles:

1. Activate database marketing with focus on collective action: Today’s communication
environment facilitates immediate connectivity among the large majority of consumer. This drives
the need to look at database marketing as a vehicle to identify advocates within social groups and
become a catalyst for marketing that drives collective action. This will be further explained in the
following section that explores new trends in database marketing.

2. Facilitate co-creativity: This goes well beyond co-creating advertising and expands into a fluid
environment where active loyalists get a stake in the brand by contributing to improve the overall
brand experience.

As trust in formal communication channels continues to decrease, marketers must be able to identify key groups of loyalists
and offer them an opportunity to co-create the brand. This effectively gives engaged customers a stake in the brand and
1, 30
therefore intrinsic motivation to participate in broad social initiatives.

Forrester data suggests that trust in advertising and traditional marketing channels is decreasing. Only 22% of consumers
declare to trust email communications that they signed up for, and less than 15% trust information from print and TV ads. On
the other hand, trust in consumer reviews, friends, and family remains strong at over 50%. Ultimately, consumers either
remain loyal to brands or try new brands depending on a combination of factors, of which personal experience and peer
2
reviews get the lion’s share of influence.

Activating brand loyalists and engendering consumer collaboration – consumers building brands – is one of the most exciting
areas of new loyalty thinking. We argue it’s an essential principle in driving brand equity in today’s business landscape on
two fronts: 1) it’s already happening – whether brands want to acknowledge it or not, and 2) more often than not – brands are
already benefiting from this effort.

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Think about getting your loyalists in a room and asking them what gets them excited about your product. What your
customers tell their friends about your product. Why they recommend your product. It sounds like a focus group – but in
today’s multi-channel/multi-touch communication environment, driving brand equity means partnering with consumers to
develop value-rich brand solutions.

Specifically then, sharing control of the brand with loyalists – an acknowledgement of consumer voice – is an example of a
new loyalty value proposition. Brand-consumer collaboration replaces traditional coupons as the vehicle for consumer
involvement and activates loyalists to engage their peers in brand – and brand equity – building activity.

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NURTURE ACTIVE LOYALISTS VIA “OWNERSHIP MARKETING”

Similar to My Starbucks Idea, Procter & Gamble’s Tide uses the multi-channel social networking platform Get Satisfaction to
match company representatives with consumers and the ideas they share, to provide an example of a new loyalty value
proposition in action.

Going beyond simple customer service, representatives champion the idea within the company and report on progress back
to the consumer through the network. This process positions the consumer as the star, and at the same time builds equity for
the idea and the brand throughout the entire community. It’s a winning proposition that provides value for both consumer and
brand.

To date, Tide has had over 350 ideas and topics discussed, with 25 company employees participating among the active
loyalists and passive participants.

While Tide’s Facebook page numbers over 225,000 fans, Get Satisfaction delivers the deeper, emotional touchpoints
loyalists need to activate passive participants into brand builders.

Specifically, these brand-building loyalist efforts include:

! Supporting ‘lost products’ – consumers helping each other find the products with which they have an
emotional attachment.
! Extending charitable brand ideas – such as introducing a “Loads of Help” toiletry companion package to
accompany the brand’s popular “Loads of Hope” disaster-relief program.
! Sharing ideas for better products – as simple as introducing particular scents as they drive multi-
channel brand-consumer involvement and further new loyalty relationship marketing.

HUGO BOSS: COLLABORATING WITH LOYALISTS TO BUILD THE BRAND AND DRIVE EQUITY
Another Procter & Gamble brand that’s embraced the concept of activating loyalists is HUGO BOSS through its HUGO
Create international design contest, asking consumers to design the company’s bottles.

HUGO Create delivers a textbook example of new loyalty relationship marketing, as a brand that’s entirely, completely, and
passionately collaborating with its consumers to impact its branding efforts.

The ongoing contest, launched in February 2008, has received more than 20,000 entries from over 100 countries through 11
previous rounds each coming with its own theme. The theme for the current round 12 centers on the brand’s HUGO Man
15th anniversary.

Aside the sheer volume of design entries, the brand has developed an entire marketing platform built around multi-
dimensional consumer creativity. The platform features a virtual and real ‘Manhattan Gallery’ that is in fact a collection of 13
out-of-home executions throughout the borough featuring various winners, a published book featuring the winners from
earlier rounds, and loyalist activity across the creative social platforms such Flickr and YouTube, in addition to Facebook and
MySpace that has reached hundreds of thousands of potential customers.

Fundamentally, the reason behind the HUGO Create success is that the idea sits squarely upon the brand DNA – creative,
hip, cool, has an edge, ‘not your dad,’ as commented by spokesmodel Jonathan Rhys Meyer – and thus squarely connects
with its active loyalists.

It’s an example of the brand investing its audience in terms of empowerment, with the audience returning the investment by
delivering both in terms of content and in terms of engagement.

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RETAIL TRENDS //
NURTURING ACTIVE LOYALISTS
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Brands are arming consumers with new tools for
engagement and social interaction, creating deeper
engagement and nurturing a more active loyalty
through these shared experiences.

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THREADLESS NIVEA

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SOCIALLY-NETWORKED STORE EXPERIENCES
The Coffee Groundz / Houston, Texas
The Coffee Groundz became famous because its operations manager used Twitter to get to know his
regular customers. He then received a request from one of them for a take-out order – reputedly the first
financial transaction on Twitter. People now regularly order food and drinks from their desks and hold
‘Tweetups’ for over 100 people – a chance for customers to drink coffee and gossip with local people all
via Twitter, while they ‘carry on working.’ This is a fascinating example of the virtual world reflecting the
small, everyday social interactions in the ‘real world’ – the mimicking of doorstep gossip about the
community in which you live.

Shake Shack / New York
Shake Shack in NY is known for great burgers, great shakes, and long lines. They’ve implemented a
Shack Cam on their website so you can check the line from your desk, and use Twitter to provide reports
on line lengths.
!

ONLINE BRANDS CREATING REAL-WORLD PRESENCE
In a time when brick-and-mortar brands are creating or relying more on their e-commerce presence, a number of brands born
digitally are creating a physical presence so they can interact personally with their loyal consumers, and reach new
consumers.

Threadless
Threadless is an online t-shirt company that crowdsources t-shirt designs from the online community.
Visitors to the site are encouraged to rate designs, and those designs with high ratings have a chance to
get printed and sold. Threadless opened 2 retail locations in Chicago catering to the artistic, open-source
consumers who design and purchase their gear. Downstairs, winning t-shirt designs from the website are
sold, and upstairs features an art gallery with work sourced from the local community.

SOCIAL SCENES
As the social interaction and experience around the brand becomes more important in capturing consumers’ imaginations,
many FMCG and product-oriented brands are investing in concepts that simulate and provide complementary services
outside the expected delivery. It’s not just about holding a party; it’s about providing beneficial, insightful content for
consumers that extends the relevance and reach of the product into social life.

Nivea
This temporary pop-up shop for beauty brand Nivea is being installed in city squares in key Italian cities to
coincide with notable cultural events, including the Milan Furniture Fair, Torino World Design Capital and
the Biennale of Architecture in Venice. The space features a concept shop and a spa that provides free
hair, nail and facial treatments. A flexible, ribbed structure allows the shop to change shape in each
location. For Milan’s Design Week, the domed construction featured furniture pieces from the fair.

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TRENDS IN DATABASE MARKETING: ACTIVATING AND MEASURING BRAND EXPERIENCES
THE RELATIONSHIP BETWEEN LOYALTY AND PROFIT MARGINS
While the examples we’ve provided in the earlier sections describe brand experiences that build equity, database marketing
is the discipline that brings into action the dynamic of transforming customer loyalty into revenue – highlighting the
“relationship between customer loyalty and profit margins.”

At RAPP, we argue the key to modern database marketing is to enable key brand experience and loyalty functions discussed
in previous sections:

1. Drive fluid customer insights: Move from reporting and marginal optimization to include cultural and
business insights that drive business.
2. Provide input to the brand experience design process: Translate cultural and business insights into
meaningful experiences that add value.
3. Nurturing advocates: Identify key advocate communities and key social drivers to maximize
engagement and advocacy value of active loyalists.

ADDRESSING CUSTOMERS IN A NEW WAY
We address customers through a four-level, multi-stage segmentation process to identify key areas of customer knowledge.
Data Levels:
1. Customer Lifetime Value: the present dollar value of future sales with a customer. This longer term metric tends
to attribute more weight to maintaining strong customer relationships over short term sales; leading to a healthier
overall business. Examples of relevant data points are Customer Purchase History, Discretionary Spending, and
Lifestyle Behavior.
2. Brand Engagement: consumer response to brand-driven communications; multi-channel. Examples of relevant
metrics are Campaign Response Data, Website Interaction Data, and Customer Satisfaction Measures.
3. Most Relevant Social Context: data elements surrounding the consumer’s relationship with the brand – that offer
the most leverage in terms of impact. Examples of relevant metrics are Purpose of Purchase Data, Product Details,
Location of Purchase, and Purchase Date.
4. Social Influence Score: a combination of an individual’s level of digital social connectivity, their willingness to
create digital content, and the level of opinion leadership they possess among their peers. Examples of relevant
metrics are Social Network Behavior Data, Content Sharing Behavior, Media Consumption, and Content Creation
Behavior.

THE NEW SEGMENTATION CONSTRUCT – STAGES 1 & 2
Stage 1 is Macro Segmentation, and it is built to align large groups of consumers with major business objectives. The
process encompasses levels 1 and 2; Lifetime Value and Engagement.

Stage 2 is Micro Social Segmentation which is nested within the Macro Segments to create more granular groups. It also
emphasizes the growing role of social influence on consumer behavior.

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Figure 4: Lifetime Value Meets Engagement

MACRO SEGMENTS THAT DRIVE THE BUSINESS
Figure 4 provides an example of Stage 1 – Macro Segmentation, identifying customers by mapping their lifetime value
against their engagement values. “Elite At Risk” customers, for example, show a high lifetime value but low engagement,
suggesting hard business objectives – such as attrition prevention - to which we can map prescriptive marketing initiatives.

Additionally, “Passive Mainstream” customers showing low lifetime value and low engagement suggest a two-fold business
objectives: 1) migrating these consumers up to higher lifetime value/engagement or 2) right-sizing the marketing investment
if migration proves difficult.

All airline frequent flier programs, for instance, began with this type of segmentation. The airline companies were able to
assess Lifetime Value and Engagement levels for program participants based on the number of tickets they purchased, the
cost of the tickets, and their response rates to direct marketing efforts. Participants who hadn’t bought a ticket for more than
6 months would receive a win back communication in the mail.

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BEYOND ATTUDINAL SEGMENTATION
Stage 1 is designed to align consumers strictly with actionable business objectives. Many companies attempt to combine
Macro Segmentation with an Attitudinal Segmentation, resulting in segments like “Elite Penny Pinchers.” This type of
segmentation strategy makes the mistake of intermingling Business Objectives with Consumer attitudes, and the challenge
becomes succinctly communicating the segmentation results to corporate executives.

More often than not, the executive suite is concerned more with business objectives than with attitudes, so being in a position
where these two concepts cannot be separated becomes a liability.

Additionally, attitudes are rarely consistent internationally, or even across large geographies like the United States. As a
result, there is significant difficulty when trying to expand an Attitudinal Segmentation scheme to a global, or even
continental, footprint.

Conversely, RAPP has seen that Context and Social Influence are textural layers that provide equivalent or improved
leverage over attitudes, but are more consistent globally. And current research, as demonstrated in the previous sections, is
beginning to suggest that innovative marketers are gaining brand affinity by having the vision to move into new social spaces
and engage with the consumer – and let the consumer speak rather than attempt to mimic consumer attitudes.

Coca-Cola’s My Coke Rewards program, for example, laid the foundation for identifying Social Influencers in the digital
space through their can-design competition, and had the potential to go further. The program, which attracted 35,000 entries,
did not capitalize on the opportunity to establish a continuous communications stream with this group of Social Influencers,
but did offer the brand a chance to experiment and learn about digital social behavior.

MICRO SEGMENTS: CATALYST FOR DEEP CUSTOMER ENGAGEMENT
Stage 2 – the Micro Social Segmentation – is designed to align strictly with the consumer, not business objectives, and
enable relevant marketing communications. These segments are layered on top of the Macro Segments so that the
business objectives can be easily extracted from the consumer objectives.

Stages 3 and 4 – Context and Social Influence – can be thought of as independent continuums. With Context, the more
information you have about a customer and their transactions with your brand the more context you can incorporate into your
messaging.

For instance, what and when did they purchase last? Do they own a small business? Does the consumer have children? All
of these questions have associated data points that provide critical layers of context. These data elements are captured over
time within your database, and hence over time more and more information is gathered about each consumer. The result is
that a continuum can be created from less context to more context. And importantly, these data points have continuity
across the globe.

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Figure 5: Micro Social Segmentation

Additionally, understanding a consumer’s level of social influence, as hinted at above, is a critical portion of this segmentation
methodology. It enables us to not only message effectively to customers but to also target effectively – and to select the
appropriate channels with which to market to each customer. We think of social influence as being divided into four groups
linked to Forrester’s Social Technographics:

1) Spectators – individuals who passively engage in the digital ecosystem; no interacting
with others digitally.
2) Connectors – individuals that interact with other in the digital ecosystem; sending and
accepting invitations, messaging, etc.
3) Culture Setters – engaging actively with others within the context of cuttingedge digital
properties.
4) Creators – creating significant digital content being consumed by groups 1, 2, and 3.
Also engaged heavily with other Creators.

Figure 5 shows that these groups exist along a continuum from the least socially engaged to the most. Consumers within
each of these groups need different communication styles through different means to truly connect with them. Creators and
Culture Setters, for that matter, can actually become ambassadors for your brand if you truly connect with them. Engaging
appropriately with these individuals can enable marketers to answer the question of “how can we leverage our database to
extend beyond its own reach.” The “Innovate with Kraft” program is a great example of a marketer appealing to consumers
for ideas on innovation.

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DEPLOYMENT: ENABLING A NEW MARKETING CONSTRUCT
Deploying this two-stage methodology may seem complex, but dynamic content delivery and channel and tactic optimization
provide efficiency to the process.

Context can be mapped to specific components of marketing collateral that can be dynamically inserted into digital
communications. For instance, a repository of images with business rules connected to them can determine what image
gets inserted when and in what communications. If a consumer is 35 and has two children, insert the picture of the family as
the backdrop in the creative rather than the middle-aged man driving a Corvette. Insert specific verbiage associated with a
consumer’s last purchase or, even better, associated with their next most likely purchase. This system creates a layer of
contextual relevance within the communication that connects the consumer need-state to the brand and is easily enabled
through dynamic technology.

Channel/Tactic Optimization is then employed to enable Social Influencers. To do this, RAPP, and others, are employing
surveys designed to determine an individual’s level of Social Influence. We can then match consumers in the database with
individuals in each of the four social groups identified by the survey results that have similar brand history, demographics,
and behaviors. This process enables us to map each individual in the database to a social group and then funnel them down
a distinct communication path tailored to their group.

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Figure 6: Channel/Tactic Optimization

MEASURING SUCCESS
The measurement process is fairly straightforward with this two-stage segmentation methodology that clearly separates
business objectives from the consumer context. Each Macro Segment is tied to business objectives inherently tied to KPIs;
lifetime value and/or engagement. These metrics are tracked over time not only for each Macro Segment but also for each
Micro Segment.

Through this, we determine overall program performance at the Macro level, but also dig deeper into each Micro Segment to
identify areas creating the largest lifts in our KPIs. By tracking KPIs in this fashion, and tracking campaign costs at the Micro
Segment level, we are able to determine ROI for each Micro Segment and thereby make the most efficient business
decisions in terms of marketing investment.

Although this top-line metric can establish and prove program success, measurement as part of the mission of database
marketing is to generate insight. All companies should be considering other metrics specific to their business that provide
relevant perspective on the behavior of their customers and enable these insights. For instance, Net Promoter Score is an
aggregated measure answering the simple question, “How likely would you be to recommend our company to a friend or
colleague?”

Responses are measured on an 11-point scale, with the top two categories considered Brand Promoters, and the bottom
seven considered Brand Detractors. Measuring NPS around segmentation can apply an additional level of data a company
can employ to sharpen both business objectives and successful marketing initiatives.

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ANNOTATED BIBLIOGRAPHY:
1
Ryan, R.M. & Deci E.L. Intrinsic and Extrinsic Motivations: Classic Definitions and New Directions. University of Rochester,
1999.

As adults – extrinsic rewards/motivations lead – in terms of action – simply because of responsibilities and such, but
within the extrinsic motivations – increasing the level of autonomy drives a higher level of
acceptance/interest/engagement with the task. So, that supports a platform experience for instance which includes a
community feature, a ratings feature, etc – giving the user a role (and a value) in the delivery of the message.

Intrinsically motivated behaviors – which take place more often in childhood/youth “are performed out of interest and
satisfy the innate psychological needs for competence and autonomy are the prototype of self-determined behavior.”

“more autonomous extrinsic motivation is associated with greater engagement,..greater psychological well-being, among
other outcomes.” Adding elements - such as autonomy, competence and relatedness - which help drive the rationale (or
composition) behind extrinsic motivations towards the value behind intrinsic motivational “appears, then, to yield manifold
adaptive advantages, including more behavioral effectiveness (due to lessened conflict and greater access to personal
resources) and greater experienced well-being.”

Further, conditions that drive towards intrinsic motivation which yields ‘high-quality’ function “allow satisfaction of these
three basic human needs – that is that support the innate needs to feel connected, effective, and agentic.”

2
Bradner, L. Building Lasting Customer Loyalty. Forrester Research, 2007.

Customer loyalty is hard to earn and harder to keep. Many loyalty initiatives fail to build real loyalty — or worse, they
subsidize behavior that would have happened anyway. Forrester’s strategic framework and loyalty self-test can help
marketing leaders identify the elements that create meaningful loyalty, the key tactics that drive it, and the mix of tactics
that are best for their business. Four major loyalty marketing tactics deliver unique levels of customer intimacy and brand
engagement: price loyalty, experience loyalty, programmatic loyalty, and relationship loyalty. The real power often comes
from leveraging multiple tactics together in order to build loyalty at all levels.

3
Bradner, L. Social Loyalty. Forrester Research, 2008.

Marketers need engagement to create long-lasting brand relationships, but how should they try to create these — and
with whom? Traditionally, loyalty programs have provided transactional interactions with customers. But marketers who
embrace social loyalty — brand affinity built on the connection of consumers to the brand as well as to each other — can
use it to move their loyalty programs from mercenary rewards to a portal for identifying, creating, and nurturing high-value
customers.

4
Chu, W., and Geller, S. Customer Experience and Loyalty: A Closer Look. Forrester Research, 2009.

Forrester examined the correlation between customer experience and loyalty across 12 industries: airlines, banks, cell
phone service providers, credit card providers, hotels, insurance firms, Internet service providers, investment firms,
medical insurance companies, PC manufacturers, retailers, and TV service providers. Our analysis looked at how three
elements of customer experience (meeting needs, being easy to work with, and enjoyability) correlate with three
components of loyalty (repurchase plans, reluctance to switch, and likelihood to recommend). We found that meeting
customer needs links the most with repurchasing and enjoyability links the most with the likelihood to recommend. It also
turns out that industries have different loyalty profiles. For instance, retailers and health insurers can influence loyalty the
most by meeting customer needs while banks and hotels can affect customer repurchase plans from all elements of
customer experience.

5
Tempkin, B.D. Customer Experience Correlates to Loyalty. Forrester Research, 2009.

Using data from nearly 4,700 consumer surveys, Forrester examined the correlation between the customer experiences
delivered by more than 100 US firms and the loyalty of their customers. Our analysis shows that good customer
experience correlates to consumers’ willingness to repurchase, reluctance to switch, and likelihood to recommend firms
across all 12 industries we examined. Office Depot has the highest correlation between customer experience and
repurchase plans while US Airways has the highest correlation between customer experience and reluctance to switch.
When we compared the data with our analysis from last year, the correlation between customer experience and loyalty
increased in every industry. Given the stronger connection between customer experience and loyalty, customer
experience professionals will need to keep their companies focused on customers.

39

6
Kemp, M.B, and Kim, P. The Connected Agency. Forrester Research, 2008.

Consumers have replaced trust in advertising with trust in individuals — in particular, friends, family, and colleagues.
Turning to communities and away from mass media, consumers will increasingly ignore messages, insist on involvement
and resonance, maintain control over their privacy, and prefer peers’ endorsements. Today’s agencies fail to help
marketers engage with consumers, who, as a result, are becoming less brand-loyal and more trusting of each other. To
turn the tide, marketers will move to the Connected Agency — one that shifts: from making messages to nurturing
consumer connections; from delivering push to creating pull interactions; and from orchestrating campaigns to facilitating
conversations. Over the next five years, traditional agencies will make this shift; they will start by connecting with
consumer communities and will eventually become an integral part of them.

7
Rousseau-Anderson, J. Technographics Survey Highlights: Shopping Habits of Loyalty Program Subscribers. Forrester
Research, 2009.

Answers the following questions: Why do US online buyers subscribe to loyalty programs? How do loyalty program
subscribers and nonsubscribers differ in their shopping habits and online retail-related social behaviors? How are loyalty
program subscribers and nonsubscribers changing their spending habits as a result of US economic conditions?

8
Mancini, M. Segmentation and Customer Loyalty. Nielsen, 2009

In a down economy, price sensitivity can trump loyalty. To strengthen the bonds with these high-profit potential customers,
innovative companies are deploying enterprise-wide strategies built on consumer segmentation. These strategies go
beyond the classic marketing applications of segmentation to drive customer-facing aspects of a business.

P&G Beinggirl
9
Bradner, L. Case Study: P&G’s BeingGirl.com Builds Lasting Brand Loyalty. Forrester Research, 2007.

Procter & Gamble (P&G) wanted to build an online destination for teen girls seeking information related to feminine care.
The site it built, BeingGirl.com, provides health content, product information, and teen community in a safe, entertaining
environment. By investing in content, offline marketing of the site, and strategic partnerships, P&G has created a
successful teen destination that drives not only visits and engagement, but also sales.

A Woman’s World – by Frito-Lay
10
Miley M., Mack A, The Rise of the Real Mom Advertising Age, 2009.

Frito Lays came up with “permissible indulgences” – ‘products that could bring a woman satisfaction with any
accompanying guilt – as the company was seeing women responsible for the buying the bulk of salty snack purchases for
their family but not consuming the products themselves – “despite their high levels of stress and the depressing impact of
the recession, which one might think would make them more apt to snack.”

“Frito Lay provided women with equivalent bit-size ‘permissible indulgences’ in the entertainment realm by also building a
website with short, animated webisodes at awomansworld.com”

Frito Lay brand manager Marissa Jarrett said women recognize “the need to take time for (themselves) to be a better wife,
friend, spouse, mother, worker. What we’re trying to do is be a part of her life in those moments.”

The women’s portfolio includes the Baked products, 100-calorie packs – products lower in fat and calories and packaged
in ‘more-subdued matte colors.’ “She’s looking for a product to start a conversation with her, not yelling at her. Our other
products were screaming out like a teenage boy.”

Also Support – for platform strategy that offers more personalization/customization – relevance.

“Smart businesses recognize that cookie-cuttter approaches don’t work,” said Jan Combopiano, VP-Chief Knowledge
Officer, Catalyst. Gina Garrubbo, BlogHer VP said, “There’s this sort of backlash and anger that women have to
marketers. What they’re saying: ‘Don’t tell us what we think; don’t tell us who we are.’”

Aliza Freud, CEO of SheSpeaks, a NY-based WOM network for women, found 90% of women say advertisers don’t
advertise to them.

Lauren Zalaznick, president, NBCUniversal, said, “A lot of people say they listen to women. Very few people actually do.”

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The multitasking tendencies of today’s moms extend to their media consumption, and as a result it’s getting close to
impossible to grab their truly undivided attention. A chief task is to present them with relevant content that fits into their
lives. “It doesn’t matter if they’re coming home at 7:05pm or starting to cook dinner at 5:45pm, their minds say, ‘Please
don’t waste my time; please respect me,’” said Zalaznick.

For NBCU, part of being respectful and relevant is creating network programming that is relatable and entertaining, and
part of it is embracing viewers’ lifestyles. Increasingly, women augment their media consumption with content from their
peers – in person, on blogs, Facebook, Twitter, etc. “They want to be heard, they want to be acknowledged,” said
Garrubbo.

Brief articles notes detailing the success of the program, including comments

11
. Bradner, L. Defining a CPG Web Site Strategy: Marketers Leaders Must Define Web Site’s Role in Each Brand’s
Marketing Mix. Forrester Research, 2009.

CPG Web Sites continue to be a mecca for consumers searching for coupons and deals – and in today’s economy, those
activities are likely to be more popular than ever. However, many CPG Web sites can – and should – do more than
provide cents off…the trick is to prioritize investment across a portfolio of sites by defining which sites should be a brand’s
digital hub and which brands may not need a site at all.

12
Elkin, T. CPG Mobile Couponing. eMarketer, 2009.

Paper and electronic coupons delivered via newspaper circulars, freestanding inserts (FSIs), direct mail, e-mail and
Websites represent the vast majority of coupons used. However, coupons sent directly to mobile devices are the next big
opportunity for CPG brands seeking to drive incremental sales and ensure loyalty.

13
Katz, J.M. Why Consumers Subscribe to CPG Emails: Understand How to Find New Email Subscribers and Keep Their
Interest. Forrester Research, 2009.

Email is a great channel for consumer products manufacturers to spread the word about their products, especially to
consumers motivated by family and cost-savings. CPG email subscribers are real fans of the brand, motivated by family,
and extra cost-conscious in a down economy. Email marketers should capitalize on the social influence of these
devotees/tailor messages to consumers’ specific preferences and provide savings tools within messages.

14
Overby, C.S. CPG Sites That Deliver Brand and User Value: How Brand Factors Influence a Site’s Consumer and
Business Goals. Forrester Research, 2006.

Consumer expectations vary across consumer packaged goods Web sites, often based on the consumer relationship and
history with the brand in other channels. As such, CPG marketers should analyze several brand and category factors to
help identify user goals and the business benefits of supporting certain goals on brand sites.

15
Phillips, L.E. CPG Online: Health and Beauty Go Interactive. eMarketer, 2007.

As part of the consumer packaged goods category, health and beauty marketers have been wary of the internet. Low
Price used to equal low online sales and involvement from consumers, or so these marketers thought. Today, consumer
behavior – particularly online search and shopping – is driving marketers to take a new look at how the internet fits into
their advertising budgets.

16
Phillips, L.E. CPG Online: Food and Beverages Party On. eMarketer, 2007.

The food and beverage category leads the US consumer packaged goods industry in online advertising, putting 2.1% of
its total $8.7 billion advertising spending online in 2006. Food and beverage advertisers cut advertising spending in every
major media in 2006 except the internet.

17
Tempkin, B.D. How Consumers Research, Buy, and Get Service. Forrester Research, 2008.

Forrester asked consumers about the channels they use when researching, buying, and getting customer service. In-
person interactions, both phone and store, dominated these activities. But consumers were not very satisfied with most
interactions. Our research also’ looked at channel preferences across generations. No surprise: Older consumers prefer
to research in a store while younger consumers prefer the Web. It turns out, however, that Gen X showed the most
preferences for buying online.

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18
Temkin, B.D., and Popoff-Walker, R. The Gen Y Design Guide: Crafting Experiences to Meet the Unique Needs of Younger
Consumers. Forrester Research, 2007.

Gen Y consumers are a unique breed. More than any other generation, Gen Yers are connected to technology for
communications and entertainment and they spend considerably more time interacting with digital media — like using
PCs, going on the Internet, watching DVDs, playing video games, and using their mobile phones. Young adults, merely by
their age, are social beings and influenced by their peers and most likely to rely on recommendations from friends or
family. To overcome Generation Y’s fickle attention and broad use of media, firms need to hook Gen Yers in by quickly
exposing value and then keeping them interested over time. Because Gen Yers are so influenced by peers and their own
communication style, firms need to speak to them authentically and on their level. Diverse and expressive, Generation
Yers respond to experiences that allow them to personalize and customize their interactions. Since Gen Y consumers are
very social, firms should consider enabling them to communicate and express themselves.

19
Tempkin, B.D. The Voice of the Consumer: The Next Generation. Forrester Research, 2009.

Voice of the customer (VoC) programs are a critical component to improving customer experience. But today's efforts are
broken in many ways. They lack action, get caught in silos, and aren't cost- or time-effective. But a number of trends are
changing how companies implement their VoC programs, including analysis of unstructured and unsolicited data,
inclusion of social media, and more continuous feedback. Companies should take advantage of these trends to
dramatically improve their use of customer feedback. The result: better customer experiences and more loyal customers.

20
Williamson, D.A. CPGs and Social Media: Much More Than Advertising. eMarketer, 2009.

Consumer packaged goods companies and social media are not an easy mix. CPGs have legacy marketing techniques
that focus on reaching mass audiences and the ways they measure marketing and sales success simply do not mesh with
the types of measurements that social media offer. This apparent disconnect may actually be an opportunity for CPG
companies. By looking at social media as a way to listen to consumers, respond to their needs, and create ongoing
dialogue.

21
Williamson, D.A. CPGs and Social Media: Much More Than Advertising. eMarketer, 2009. (PowerPoint)

Building a fan base with a coupon or discount is a short-term promotion. Social media is a long-term opportunity. CPGs
will be challenged to measure social media’s impact on sales. But imperfect metrics are better than none at all. Social
media marketing is about being open to feedback rather than getting people to spread your message.

TGIFridays – collaborative consumer campaign
22
TGI Friday’s reports loyalty scheme’s success. Thewisemarketer.com, 11.3.08.

Program: ‘Give Me More Stripes’

Members receive a free appetizer or dessert (up to $8US value) on signing up, a one-time ‘jump-the-line pass, $8US
certificate for every $100 spent (excluding alcohol, exclusive communication re: specials and menu previews,
complimentary chips & dip, or hummus & chips, free snack bag during lunch.

Results: net of over 500K members

“We struck a nerve with the consumer by offering a value proposition and an enhanced in-restaurant experience,” said
Andrew Jordan, SVP Marketing TGI Friday’s USA

Harris Interactive survey shows 87% of US adults “would find membership in a restaurant recognition or rewards
programme appealing.” And of those respondents ,79% “would find complimentary food or drink an appealing feature” in a
restaurant reward program.

Ikea – Facebook tagging keys value exchange - promotion

23
Warren C. Facebook Marketing: IKEA’s Genius Use of Photo Tagging, Mashable. 2009.

42


IKEA’s recent Facebook campaign is “awesome.” The Swedish furniture company opened a new store in Malmo,
Sweden, and rather than spread the word the old-fashioned way, they decided to go directly to the people using
Facebook.

An account was created for the store manager at the Malmo store. Over a two-week period, showroom images were
uploaded to his Facebook photo album. Using the all-popular “tagging” feature, customers were able to locate items in the
pictures and put their name on it. The first person to tag an object got to take it home.

The word spread through Facebook and users started embedding links and images in their own profiles and across news
feeds. In turn, thousands and thousands of users willingly promoted IKEA and its new store to others, creating a big win
for IKEA.

24
Neff, J. P&G Taking Its Marketing Back to the Store. Advertising Age, 2009.

If it doesn't work at the store, it's no longer a good marketing idea for Procter & Gamble Co., which increasingly is driving
home this concept, known as "store back," with all its agencies, not just its so-called shopper-marketing shops.

25
Brat, I. A Jar of Vegemite, a Window on Kraft. Wall Street Journal, Sept. 30, 2009.

Kraft Foods Management Australia developed a new form of Vegemite to match the changing tastes of its consumers.
Kraft managers worked with consumers on the product’s formulation.

26
Foley, M. Vegemite Contest Draws Protests. New York Times, Nov. 2, 2009.

Kraft Foods Australia held a contest to name a product extension of the Vegemite brand receiving almost 50,000 entries.
The first consumer-sponsor name selected ‘iSnack 2.0’ raised thousands of protest responses to which the company
adjusted course, and renamed the product ‘Cheesybite.’ “Kraft has turned a fairly pedestrian product launch into a matter
of public pride and public ownership and affinity for the Vegemite brand,” Mr. McCusker said. “That’s what today’s media
thrives on: the conversations, the open expression of opinions, the love, the hate, the passion — and we’re talking about a
jar of spread.”

27
Court, D. Elzinga, D. Mulder, S. and Jørgen Vetvik, O. The Consumer Decision Journey. McKinsey Quarterly
Number 3, 2009.

Consumers are moving outside the purchasing funnel—changing the way they research and buy products. If marketing
has one goal, it’s to reach consumers at the moments that most influence their decisions. Marketing has always sought
those moments, or touch points, when consumers are open to influence. Today, the funnel concept fails to capture all the
touch points and key buying factors resulting from the explosion of product choices and digital channels, coupled with the
emergence of an increasingly discerning, well-informed consumer.

A more sophisticated approach is required to help marketers navigate this environment, which is less linear and more
complicated than the funnel suggests. We call this approach the consumer decision journey. Our thinking is applicable to
any geographic market that has different kinds of media, Internet access, and wide product choice, including big cities in
emerging markets such as China and India.

We developed this approach by examining the purchase decisions of almost 20,000 consumers across five industries and
three continents. Our research showed that the proliferation of media and products requires marketers to find new ways to
get their brands included in the initial-consideration set that consumers develop as they begin their decision journey. We
also found that because of the shift away from one-way communication—from marketers to consumers— toward a two-
way conversation, marketers need a more systematic way to satisfy customer demands and manage word-of-mouth. In
addition, the research identified two different types of customer loyalty, challenging companies to reinvigorate their loyalty
programs and the way they manage the customer experience.

28
Stelter, B. Web-TV Divide Is Back in Focus With NBC Sale, New York Times, Dec. 3, 2009.

As Comcast’s purchase of NBC begins to take shape, a rising question/concern in the landscape of television viewing is
how to better incorporate into the business model the viewers who are consuming programming through the Internet
through sites like Hulu.com and Fancast.com. The sites illustrate the influence of the Internet on evolution of
entertainment consumption.

43

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