August 2011
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Month August 2011

Hi there. I'm a Partner at Undercurrent, where I lead a team focused on helping ambitious organizations operate in ways that are beneficial to all their users.

Integrated Loyalty: Altering Satisfaction Variables

Part three of five in a series on loyalty. We’re halfway there, don’t give up on me now! Comments and contributions will be part of part five. – Clay

Now for the traditional, business school stuff: variables of customer satisfaction.

Satisfaction among a set of customers, no matter the business, seems to be composed of six key variables:

  1. Product Performance: Does the thing I’ve purchased live up to my expectations?
  2. Price: Does the price of the product match up with its performance relative to my needs?
  3. Information: Does this thing give me some mental benefit that I haven’t had before?
  4. Privileges: Am I afforded some unique opportunities, above and beyond what I expected of the product?
  5. Surprises & Delights: Is there some un-promised and awesome thing that happens as a result of my using this thing?
  6. Delivery Systems: How do I receive this thing?

Differentiation from competitors can be – well, kinda has to be – created in multiple categories, and the more differentiation, the better.

You knew that.

But what we’re talking about here isn’t just general best practices for business, it’s building integrated loyalty systems. Yesterday we covered the “How?” question for collective action, and today we’ll cover the “How?” question for altering satisfaction variables, based on the collective action that you’ve created by doing something great for your customers and prospects on the internet and in the real world.

The first step is to map how your product works against the six components of customer satisfaction, according to the segment of people who use your product or service that you’re targeting with your efforts in the collective action space.

You should probably do research to find out how you’re doing. Don’t guess.

From there, I’ve adapted a pretty straightforward process from Dawn Iacobucci and Bobby Calder’s Kellogg on Integrated Marketing for deciding what kind of benefits make sense to provide to the people that engage with you. You should buy that book, by the way. It’s super dorky, but really helpful.

Iacobucci, Calder et al. provide seven phases:

  1. Set the vision: Where are we going?
  2. Identify best customers: What’s important?
  3. Value them: What are they worth?
  4. Set goals: What will we accomplish?
  5. Set attributes: What do I do for them?
  6. Communicate: How do I get the word out?
  7. Evaluate: Did it work?

I’ve dropped the last two as they ought to be intrinsic to the program; measurement and communication shouldn’t be “phases” but should be core to what’s going on, and I’ve simplified it/made a few tweaks here and there.

So with that in mind, I’ve layered my revisions to their phases with the Collective Action Design Framework and the Satisfaction Variable Performance thing:

Click the image to embiggen.

Clunky name, I know. You’d probably fill this thing out, like a worksheet. Answers in every box inform every other one, I imagine, so it’s likely that you can’t just do strategy by numbers here.

This is intended to be used for a single group of people, not to describe your broad vision for loyalty. You might have multiple targets and multiple ways of engaging them, and that’s okay. Just be sure to map them out.

So here’s how to use this framework.

Intent: What are your broad goals in terms of customer loyalty?
Do you want to increase loyalty? Do you like having customers? I hope so.

At its broadest scale, what are your intentions in the space? Write them down.

Identification: Which people within this community are most important to your business?
The biggest surprise in my business-life is that most companies don’t have a clear or shared understanding of who of their customers are, let alone who among all their customers are the “best.” Define best as you will. Sure, there’s a colloquial understanding, or an aspirational understanding, but hardly ever clear-cut, simply explained and collectively held knowledge across everyone in an organization.

So in the identification piece, for a particular community of people that are your customers and are interacting with you in the social space, the key outcome is to be able to agree upon and write down the groups of people that are important to your business, either for marketing reasons or commercial reasons.

Evaluation: What is the lifetime value of the people that are most important to you?
Even harder challenge: tell me, tell anybody the actual lifetime value of the people you’ve identified as important to your business.

What value do they provide? How do they provide it? Do they buy a ton of your product? Do they buy a little of your product, but they buy it consistently over a long period of time? Do they help you improve the way you do business? Do they spread your messages to all their friends?

Sidebar: Non-sales (or Marketing) Value
There’s a million ways that people provide your business with value, and when you’re considering the different ways people do it, don’t forget about things that don’t explicitly tie to sales. I know, I know. But it’s important.

Key outcome of the evaluation piece: for the people that are important, work to define in absolute terms how much value they provide to your organization.

Objectives: What change do you want to create within these important people?
You’ve now officially left the really difficult part of the program. If you know who is important, and you know why they’re important, deciding on the change you want to create is easy.

Sidebar: Objectives
And yet, objectives frequently suck. Probably because people don’t do their homework. If it’s not measurable, it’s not an objective. Anyway.

With the community of people in mind, decide what kind of change you want this integrated loyalty effort to produce. You could make the group buy more frequently. You could reduce the likelihood that a valuable customer would decide to not buy from you again. You could get certain, vocal segments to talk about you more. You could get more information on a segment you don’t know much about (scary, but you could do that). You could grow the number of people in a certain segment, as defined by purchase habits, beliefs, etc. You could find people that are similar in some way to your most valuable customers (look-alikes) and try to get them to be more like your best homies.

Outcome: One or more measurable things that you want to achieve. Almost done!

Initiatives: What are you going to do for these people that will create the change you want?
Now for the fun part, but probably a contentious one within an organization: deciding what valuable thing you’re going to give to people when they give attention, money, or some other valuable thing to you. Using the satisfaction variables, choose one or more things to change. To make it amazing, choose things that are tied to the Collective Action Design Framework.

In yesterday’s example, trading Membership Rewards points for participation in a reward-point-obsessed community makes a ton of sense. In my mind, that’s part Price variable and part Privilege variable. Most loyalty systems seem to fall along this spectrum, predominantly because it’s harder to vary the other elements.

But you’ll be better off if you’re more creative.

  • Dropbox is able to vary Performance by giving people extra space for successful referrals.
  • Zappos varies Delivery by speeding up the shipping process for people that are likely to spend more in the future.
  • They’re not loyalty programs per se, but Mint, Netflix and OkCupid give more Information to people that give them more information.
  • Local bars and restaurants vary Privilege and Surprises/Delights by hooking regulars up with more attentive service and a freebie now and then.
  • Bank of America (and I assume all banks, but I know BofA does this because I worked in their call-center once) varies Privileges by giving special, live phone support to customers that have multiple accounts with the bank,
  • My aunt and uncle use an unofficial credit system to ease Delivery for frequent customers, putting a card with their name on it in a box near the register; if you are on a ride and need a tube, but are out of cash…no problem.

So the outcome for this final piece is to pick the variable most aligned with what the community wants, and improve it in some obvious way. These are your initiatives, and you should work with your partners and internal resources to get them done.

And unless you’re the owner of a small business, you’ll probably need to use the outcomes of Identification, Evaluation and Objectives to substantiate your decision in financial terms, but that should be easy at this point.

Onward and upward from there!

More tomorrow, but thanks to all y’all so far for your comments and thoughts. I’ll be including them in the final output of this, on Friday, which I think will be a whitepaper of sorts. If you’re cool with it, I’ll include your quotes, name, and a URL of your choice in the document. I think it’ll be cool.

Integrated Loyalty: Creating Collective Action

Part two of five in a series about loyalty. Breaking it down! Come back tomorrow, yes? – Clay

One of the big, important pieces of my approach to marketing strategy (more on that next week) is a belief that brands should do really amazing things for people. This can take the form of a delightful piece of short-format cinema, or it could be some interesting interconnected system of digital things.

But if we’re talking about things on the internet – and what doesn’t fall into that category in some way? – ultimately those things should be designed to create action. But like most things that reverberate in the strategy twittersphere, “designed to create action” is pretty easy to agree to.

It’s the “How?” question that’s really difficult to answer.

Dueling Approaches
Our dear leader, Aaron, has a great book on getting people to do things that they might not necessarily want to do, or that they don’t have the skills to do on their own. I’ve seen this done exceptionally well, but it’s definitely an advanced move.

In my experience, success comes from aligning the thing you want people to do with something people are already doing. For me, it’s the easy pickings, the foundation upon which everyone should be building.

Sidebar: Ad Spending
To that end, I’ll never recommend buying an ad on a site where people just read shit, even if that shit is wonderful, engaging and superbly written shit. If it’s a place where people go to DO things? Yeah, give them all your (ad) money.

Last year, my delightful and brilliant colleague Mike Arauz put together something he called the Community-Centered Collective Action Design Framework (CCCADF?), a synthesis of the following:

These four things are why people “play”, but in my mind, they’re why people do anything they don’t have to do. We use this all the time. Mix one part of the above with…

These are from a paper about why people use Threadless, (PDF) and are pretty spot-on. Add to that some core elements from MIT research on collective intelligence, and you get…

Click the image to enlarge.

The Collective Action Design framework is, to me, the fundamental tool that strategists should use to test and validate their recommendations when those recommendations hinge on creating action in a group of people. Nice work, Mike.

It’s pretty straightforward to use: do your homework, and fill in all the bubbles.

Sidebar: Interest vs. Demographic Groups
Demographics and psychographics are tough. I’m not sure they do much of anything in the digital world. So when it comes to answering the “who” question, work on defining the thing that holds the community together. On the internet, “Who” is defined by interest and nothing else.

Need a glossary? Here you go, stolen from Mike’s post on the topic:

What is the shared interest that brings these people together and defines their collective identity? (Hint: the answer is not “our brand”)

What is an aspect of our world that this community would be inspired to help change? (Hint: it can be big or small, as long as it’s a specific outcome that is inspiring to the community)

What are the beliefs that guide this community’s decisions? (Hint: look at the kinds of information that strengthen bonds between members and gives members status within the group)

What are the common modes of interaction and communication within the community? (Hint: pay closer attention to what people do, than to the platforms that enable it)

Goal: What specific collective action is the group contributing to?
Create – the group needs to create something new
Decide – the group needs to choose

Participants: Who is the group of people who will be working together?
Crowd – a loosely organized, widely distributed group of people, typically unrestrained by place or time
Hierarchy – a group organized by a management structure, with specific roles and responsibilities for each participant

Motivations: Why will each person within this network be compelled to participate?
Money – in exchange for a monetary reward
Glory – for the opportunity to gain public recognition
Expertise – to hone their skills and get better at what they do
Social – to spend time with people they like
Satisfying work – the feeling of accomplishing meaningful tasks
Be part of something bigger – the sense that they are contributing to something bigger than themselves
Personal passion – because this is something that they love to do

Tools/Methods: How will the group be enabled to participate?
Collection – each participant contributes in small pieces on their own
Contest – used when there is a limit on how much needs to be created
Collaboration – used when individual contributions necessarily affect each other
Voting – each participant votes for their favorite choice, most votes wins
Averaging – each participant rates independently, and the aggregate ratings are averaged for a final rating
Consensus – participants engage in direct dialogue with each other to agree on a precise outcome
Prediction Market – participants place bets on what they expect to happen
Market – participants spend money to express their choices
Social Network – participants trade in social currency to guide and express their choices

This is a model, and as such it’ll break sometimes, but in my usage it works more than it doesn’t.

So, what to do with all this? And who’s doing it well?

There are a few companies doing collective action well, but by and large their efforts are disconnected from their customer masters on the back end. And if the company is doing collective action really well, it’s likely that they’re a born-digital company that has CRM/Loyalty built in to the soul of the company (Quirky, Foursquare, OkCupid, Amazon, etc.)

So how about an old fogey doing well in the new world?

Amex + Flyertalk = Top Flyer

This is great. Or at least, mostly great.

If I were an airline, I’d be doing what American Express is doing with the Flyertalk forums, where participation in Top Flyer group discussions earns you points, and the top point earner gets Membership Rewards points or cash. There’s no reason why I shouldn’t be able to log in to Flyertalk with my Delta SkyMiles number and rack up points for participating.

The Top Flyer activation probably shouldn’t be its own forum and could be more complex in its scoring mechanisms, but…

  • It’s well-connected to the interests of the group (improving travel experiences)
  • It creates some interesting hierarchy structures that absolutely align to the way forums work (mods, etc. …this could be blown out more, though)
  • It would be nice if it weren’t just about “travel know-how” and was more about making decisions for a company (which is why an airline would be perfect for this)
  • Its tools and methods are exactly aligned with what’s already happening on Flyertalk

Focus on Action and Connect the Tubes
All of that was a long way of saying two things: when it comes to loyalty, you should focus your digital efforts on creating engagement that’s built on existing motivations, interests, behaviors, and tools; those efforts should connect back to a customer master so you can incentivize valuable behaviors.

Otherwise, two things are happening.

  • You’re buying impressions and you really ought to be buying something more efficient for that.
  • You’re creating action for action’s sake, which is cool engagement but inherently disconnected from the sale.

Both of which are a bummer, right?

Comments appreciated. See you tomorrow, loyal readers.

Integrated Loyalty: Three Cycles

Post one of five in a series about loyalty. Please do come back tomorrow. – Clay

So I’ve been thinking a bit about loyalty over the past few months.

After a few beers in The Henry in Dearborn, I put some crude thoughts onto a napkin.

More or less, I was thinking that a new, cool perspective on loyalty programs could be made up of three important parts:

  1. A part that gets people to do things with and for each other
  2. A part that uses known satisfaction variables to make people’s experiences better if they do things that are valuable (beyond referrals)
  3. A part that recognizes or creates traditions within groups of people

After thinking about it some more, I still like the framework.

Click the image to enlarge, or download the Integrated Loyalty PDF here.

I’m planning to post more on this during the week, but I think there are three key cycles for creating a good, modern, integrated loyalty execution.

  1. Engender Collective Activity
    This is pretty straightforward. If you’re creating a program – or ideally, a product – that creates collective action, you’re creating an amazing foundation for a next-generation loyalty program. If people are working on behalf of their group and in so doing are furthering your company’s cause, the work those people are doing should be rewarded with something.
  2. Alter Satisfaction Variables
    Now for the cookies. The work I put in, either by using goods and services frequently or by pimping the brand on the internets, should snare me something delicious. And when I say delicious, I mean it should tangibly change the way I experience your company. Born-digital companies get this, and crush it (generally), and pre-digital companies tend to stink it up.
  3. Create and/or Cement Tradition
    Now for the new shit, and probably the thing most likely to cause an argument: creating traditions. As far as I know, brands don’t tend to get into the tradition “discussion”, if there is one, and it’s mentally difficult for me to recommend to people that they should be out there trying to make a tradition stick with a bunch of people. But in little ways, it’s happening, and if a smart/adaptive program should be able to take advantage of tradition when it appears.

More on these this week, but please do let me know your thoughts in the comments.

Natural Wing Design

Posted above for comparison: the Boeing 777, designed in the ’80s and ’90s; the Boeing 787, about to launch; and the slow-motion owl.

I thought that slow-motion owl was just about the coolest thing I’d ever seen. Aside: his hands are silly.

Three things occurred to me as I was watching the owl contort its body and wings as it flew to the target. One was Paul Simon.

He makes it look so easy
He looks so clean
He moves like god’s
Immaculate machine
He makes me think about
All of these extra movements I make
And all of this herky-jerky motion
And the bag of tricks it takes
To get me through my working day
One-trick pony
// Paul Simon

Two was that we still have a long way to go when it comes to flight.

Three was to continue to look to nature for inspiration.

Aside: did you know the 787′s wings can flex 25 FEET!?

Yeah. They can.

Goodbye Action

I love a thoughtful interface.

So many sites do a crap job of activating at every possible moment.

This is Twitter’s sign-out screen, and it’s a great example of giving customers/users/whatevers a goodbye action:

It’s a decent space for a branded integration, too. Here’s a thing we did with OkCupid and DonQ a little while back.

Just a reminder to consider every space when you’re designing an experience.