April 30, 2007

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Linked In But Lonely In a week I doubled my LinkedIn network by using very cool tools they've developed to scoop up your contacts from Outlook, Hotmail, Gmail and Yahoo and match them with the membership database. With a few clicks I invited my pals to formally connect with me on LinkedIn. Now we're linked but leery. This exercise in trying to figure out if I'm the right demographic to take advantage of the social networking phenomenon prompted a bunch of interesting reactions. Roughly 20 percent of the people I pinged asked me why I was linking to them. They expressed doubt about the value of connecting ourselves on this formal network.Many said they were members of a club that they couldn't explain and didn't see any value from. Another 25 percent sent me e-mails outside the system asking questions or catching me up on business or personal details. It taught me that the true value of a network lies in its use. Who cares that you know a lot of people? If they aren't engaged with you and if they can't be quickly mobilized to help you they are just names on a list. Incidentally I asked 20 friends to look at a prototype web site the week before. Fifteen and 15 of them commented thoughtfully within 36 hours without logging into the infrastructure of a social network. I routinely ask people I know for stuff --- advice, contributions to charity, introductions to their friends, research questions for my clients, travel and restaurant recommendations and job leads for friends and family. I don't use anything more sophisticated than my contacts list. And when I did use LinkedIn recently I drew a blank. I contacted a former colleague in Germany who I knew worked with the Director of Business Development at LinkedIn. I targeted LinkedIn as a potential partner for one of my clients so I pinged my guy and asked for an introduction to his guy. He did it. And the friend-of-my-friend agreed to talk to me and gave me his e-mail address. I wrote him and then --- radio silence. I got the same result on the 2nd, 3rd and 4th tries too. So I'm LinkedIn but lonely. The network's value proposition is to extend my business reach and influence and to accelerate my ability to connect with others. But so far I've supplied the only energy in the mix and the only thing I've extended is the list of names attached to mine which doesn't thrill any of us.
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7 Keys to Loyalty Marketing Everybody wants loyal customers. Everybody wants to zero-in on that 20 percent of the customer base that drives 80 percent of profits. Finding and caring for the people who love you, buy a lot, buy often and tell everyone they know about you is the rationale for massive spending on customer loyalty programs, which for years were based on the rats-through-the-maze premise that points, air miles and rebates will guarantee and secure your best customers and turn half-hearted customers into brand loyalists and outspoken advocates. But Colloquy's loyalty census suggests that the rush to set up programs has resulted in bloated lists of people who aren't really participating and who just aren't that loyal. Active program participation across all business sectors is 39.5 percent, a "dismal" result according to the researchers. The old metric of total program members seems a lot less meaningful than actively participating members, defined as those enrolled and actively changing behaviors to earn rewards. Consider these highlights. American customer loyalty programs have enrolled 1.3 billion members -- 4 times the US population The average household is signed up in 12 programs but actively participate in just 4 Airlines, credit cards, grocers and specialty retailers account for 57 percent of all loyalty program activity Gaming companies, leveraging significant usage data on members, are working hardest and making the most gains in using loyalty programs to drive profits. The data suggests that marketers have defaulted to loyalty programs but haven't connected the dots in terms of meaningful data, insight or personalization to get them to pay off. In some sectors the mere existence of a loyalty program has been equated with the benefits of a well run program. But the bottom line is that customers have a limited amount of focus and attention. No one really has 12 favorite merchants and even when they have a favorite in each category, the interest and intensity of the relationship varies by circumstances, need, cost and time. Its no wonder that categories with high repeat sales have the most actively engaged members. But given the ubiquity of credit card programs, its actually surprising how many customers feel that the rewards aren't worth the trouble or that the ratio of points to dollars spent are meaningless. We all know card holders that look at the reward catalogs make a quick calculation on the cost of goods and quickly conclude that the cost to acquire a toaster, a trip or a flat screen TV by redeeming points is much greater than buying the same item at retail. The subsequent judgment, usually made with a healthy amount of skepticism and frustration, is that the loyalty program isn't worth it. So now you're in a program where you've amassed points that don't buy much or buy things at inflated prices so you're locked into a currency that's not worth redeeming and you head to Points.com to see if you can salvage the situation. The net result is the opposite of the program's intention. You have high-value customers who invested in the brand and who are frustrated and sometimes angry, that you've saddled them with undervalued points. This isn't exactly the prescription for building brand loyalists and advocates and probably explains the relatively low engagement levels of program members. It seems to me that loyalty programs work best when ... 1. They are geared to high frequency/high involvement purchases. 2. They integrate and leverage purchase histories and customer data or preferences to maximize personalization, There is zero trophy value in a one-size-fits-all reward. 3. Point levels are set (and re-set) to drive specific behaviors. The do-this-and-win formula works. The trick is to make it simple, frequent and pay it off instantly. The classic RFM principle from direct marketing applies here big time. 4. Points must be awarded and communicated frequently. When members hit selected point levels they should be recognized and redemption options plus incentives to get to the next level ought to be presented. Recognition ("You are a PLATINUM member") is as much a part of the game as the one million points. 5. Members must perceive the points/merchandise relationship to be a good deal. Consumers have a knack for quickly assessing the value-for-money equation in any situation. You cannot get around this and you cannot cheap it out. And while it flies in the face of marketing orthodoxy, it probably helps if points are transferable or options exist to combine points from several programs to get a big ticket item. Brands can still get...

Danny Flamberg

I am a veteran marketing consultant working with leading and emerging brands

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