the hub magazine - the wish list

The holiday season is a beautiful time of year. A renewed focus on traditions and other activities anchor us as families, communities, and society as a whole. Hope and optimism — or at least a willingness to suspend our cynicism — returns, at least for a short period of time. A natural tension between the traditions we hold near and dear and the newest “shiny object” that we (or our children) desire to bring into our households — whether it’s dolls, toys, games, electronics or something else — allows us to make new memories.

Shoppers are looking to fulfill on the entire promise of this time of year. Trying to satisfy all of the demands of this season is a high-stakes, high-stress game. Our “day jobs” haven’t gone away. We’ve all found that it’s not easy to maintain traditions, create new ones, and keep everyday life moving along, without major bumps in the road.

Traditions are a high-stakes game for marketers too. Traditions encompass both the memories of the past and the promise of the future. As a marketer, nostalgia can be motivating; it can also be the kiss of death. There’s the opportunity for your brand to become timeless … or firmly planted in the past. Marketers see this tension and try to hold onto their core equities and usage occasions while also “contemporizing” them.

So, amidst this tension, how can we, as marketers and retailers, help shoppers manage the conflict between past and future and create and nurture new traditions? How can we do the same for our own brands?

One solution that often bubbles up is the notion of a loyalty program. Why? Because traditions start as one-time activities. Those activities were so enjoyable or meaningful at the outset that they are then repeated. The act of repeating them establishes loyalty to the activity. Add some conscious activation to the tradition and that becomes, in effect, a loyalty program.

A loyalty program offers a number of potential drivers from a marketer’s or a retailer’s perspective. First, there’s the idea of rewarding consumers for the behavior they exhibited over the course of a year and giving them a “thank you” for that behavior at the end of the year.

Some may also think of a loyalty program as a way to deliver rewards at a time when shoppers are looking to stretch their dollars as far as they can go to buy as many desired products as possible. Or, maybe you are looking to reinforce and support your traditions as a brand, and have shoppers join you in this process. Loyalty marketing is a way to drive that connection between the shopper and the brand, resulting in a tradition, in and of itself.

At the end of the day, what marketer wouldn’t want shoppers to choose their brand over a competitor’s more frequently? Increased share of requirements, while maintaining frequency, is quite a gift for the marketer.

What are the motivations for loyalty programs from a retailer’s perspective? Loyalty has been a hot topic for a long time, resulting in a variety of savings-based programs — from the now-standard shopper card to the most sophisticated targeting efforts from Kroger and Dunnhumby. In the end, the retailer is aiming to have the shopper choose their store first over all others.

Six Core Needs

What is it about loyalty programs that attract shoppers? According to our most recent study on digital shopper-marketing, when asked for a single wish from the shopping “fairy godmother” to improve their shopping experience, six main wishes emerged: Shoppers are looking to save money; save time; reduce effort; feel like a smarter shopper; have their values supported; and be rewarded for their behaviors through experiences and offers.

But have loyalty programs truly driven loyalty among shoppers? Have they successfully connected the needs of brands, retailers and shoppers? Colloquy reports that there are 1.8 billion loyalty programs in existence in the US.

On average, a consumer is a member of 14 loyalty programs, and only actively engages in less than half — 6.5 of them. More than 350 million loyalty program memberships are available across the grocery, mass, club and drug classes of trade, or about three per household.

Those statistics seem to imply high levels of sign-up, but potentially limited levels of success in driving loyalty on a large scale. Some other studies have indicated loyalty programs simply help slow declines in a business, so the overall business trends look “less bad.”

The recession has also pressured the use of loyalty programs and what they can offer shoppers. High unemployment, tighter budgets, and the trends toward savvy savers are driving shoppers to re-examine everything.

When it comes to loyalty programs, Colloquy also reports that consumers demand low prices as the number one determinant of loyalty to a retailer. It clearly seems to be a time when loyalty is feeling tougher and tougher to achieve.

How can brands and retailers innovate and instill loyalty among their shoppers? As we emerge from the recession, it’s time to think about the notion of functional and emotional loyalty. This concept has been employed for years in “above the line” marketing: the idea that brands must establish both a rational and emotional reason-for-being to forge strong, lasting connections with consumers.

To date, nearly all loyalty programs operate in the functional space — buy something, get points (or some other currency), and then use them in the future on something. That “something” could be cash back, products, services, or even cause donations. Or, join the loyalty program and receive savings on products you buy.

Do frequent-shopper cards count as loyalty programs? No doubt they were originally intended for that purpose, but it is questionable today what role they play and what kinds of activities they facilitate with shoppers.

What are some steps we can take to create or reinvent the next generation of loyalty programs? First, go back to the six core needs as outlined above. Second, determine which of those core needs the loyalty program is going to deliver against through an overarching solutions concept. From this point, you can explore the functional and emotional benefits the loyalty program will offer.

Engaging shoppers to help co-create or provide feedback on the loyalty program concept and its benefits can help hone your judgment. To help understand which elements work with which shopper segments and retailers, we hold ongoing conversations with some 3,500 shoppers across a range of retailers and classes of trade. When you build these types of shopper interactions into your overall development plan, shopper-centric development becomes less of an afterthought and more of an integrated, iterative and thoughtful process.

The next stage is identifying the media and social channels in which you plan to activate the loyalty program. With today’s media explosion, especially in the online realm, understanding the shopper and the media with which they engage is critical. Again, designing the program to integrate these touchpoints strategically and seamlessly, and knowing a shopper’s desired experiential path, will simplify the incredibly complex media landscape.

Finally, as you begin to pull the full range of the program together, consider which capabilities you need to launch this program successfully, and which of those could be spun off from the program to generate additional business benefits. Technologies, ad serving, and other capabilities could become as important as the loyalty program itself.

With all the pieces in place, it’s time to see if the program you have developed is, in fact, ready to create a highly enjoyable activity with shoppers. Are they willing to repeat that activity? Will they go back to it regularly? Does it win their hearts and minds to such an extent that it becomes a new shopping tradition for them?

If so, you’ve fulfilled the promise of the holiday season — you’ve created a new memory for your shopper, something that will live and last, which you can re-live year after year.

Happy memory-making.



	NOVEMBER / DECEMBER 2010


	The Wish List

	*New habits and old traditions create emotional loyalties among holiday shoppers.*

	The holiday season is a beautiful time of year. A renewed focus on traditions and other activities anchor us as families, communities, and society as a whole. Hope and optimism — or at least a willingness to suspend our cynicism — returns, at least for a short period of time. A natural tension between the traditions we hold near and dear and the newest “shiny object” that we (or our children) desire to bring into our households — whether it’s dolls, toys, games, electronics or something else — allows us to make new memories. Shoppers are looking to fulfill on the entire promise of this time of year. Trying to satisfy all of the demands of this season is a high-stakes, high-stress game. Our “day jobs” haven’t gone away. We’ve all found that it’s not easy to maintain traditions, create new ones, and keep everyday life moving along, without major bumps in the road. Traditions are a high-stakes game for marketers too. Traditions encompass both the memories of the past and the promise of the future. As a marketer, nostalgia can be motivating; it can also be the kiss of death. There’s the opportunity for your brand to become timeless … or firmly planted in the past. Marketers see this tension and try to hold onto their core equities and usage occasions while also “contemporizing” them. So, amidst this tension, how can we, as marketers and retailers, help shoppers manage the conflict between past and future and create and nurture new traditions? How can we do the same for our own brands? One solution that often bubbles up is the notion of a loyalty program. Why? Because traditions start as one-time activities. Those activities were so enjoyable or meaningful at the outset that they are then repeated. The act of repeating them establishes loyalty to the activity. Add some conscious activation to the tradition and that becomes, in effect, a loyalty program. A loyalty program offers a number of potential drivers from a marketer’s or a retailer’s perspective. First, there’s the idea of rewarding consumers for the behavior they exhibited over the course of a year and giving them a “thank you” for that behavior at the end of the year. Some may also think of a loyalty program as a way to deliver rewards at a time when shoppers are looking to stretch their dollars as far as they can go to buy as many desired products as possible. Or, maybe you are looking to reinforce and support your traditions as a brand, and have shoppers join you in this process. Loyalty marketing is a way to drive that connection between the shopper and the brand, resulting in a tradition, in and of itself. At the end of the day, what marketer wouldn’t want shoppers to choose their brand over a competitor’s more frequently? Increased share of requirements, while maintaining frequency, is quite a gift for the marketer. What are the motivations for loyalty programs from a retailer’s perspective? Loyalty has been a hot topic for a long time, resulting in a variety of savings-based programs — from the now-standard shopper card to the most sophisticated targeting efforts from Kroger and Dunnhumby. In the end, the retailer is aiming to have the shopper choose their store first over all others. Six Core Needs What is it about loyalty programs that attract shoppers? According to our most recent study on digital shopper-marketing, when asked for a single wish from the shopping “fairy godmother” to improve their shopping experience, six main wishes emerged: Shoppers are looking to save money; save time; reduce effort; feel like a smarter shopper; have their values supported; and be rewarded for their behaviors through experiences and offers. But have loyalty programs truly driven loyalty among shoppers? Have they successfully connected the needs of brands, retailers and shoppers? Colloquy reports that there are 1.8 billion loyalty programs in existence in the US. On average, a consumer is a member of 14 loyalty programs, and only actively engages in less than half — 6.5 of them. More than 350 million loyalty program memberships are available across the grocery, mass, club and drug classes of trade, or about three per household. Those statistics seem to imply high levels of sign-up, but potentially limited levels of success in driving loyalty on a large scale. Some other studies have indicated loyalty programs simply help slow declines in a business, so the overall business trends look “less bad.” The recession has also pressured the use of loyalty programs and what they can offer shoppers. High unemployment, tighter budgets, and the trends toward savvy savers are driving shoppers to re-examine everything. When it comes to loyalty programs, Colloquy also reports that consumers demand low prices as the number one determinant of loyalty to a retailer. It clearly seems to be a time when loyalty is feeling tougher and tougher to achieve. How can brands and retailers innovate and instill loyalty among their shoppers? As we emerge from the recession, it’s time to think about the notion of functional and emotional loyalty. This concept has been employed for years in “above the line” marketing: the idea that brands must establish both a rational and emotional reason-for-being to forge strong, lasting connections with consumers. To date, nearly all loyalty programs operate in the functional space — buy something, get points (or some other currency), and then use them in the future on something. That “something” could be cash back, products, services, or even cause donations. Or, join the loyalty program and receive savings on products you buy. Do frequent-shopper cards count as loyalty programs? No doubt they were originally intended for that purpose, but it is questionable today what role they play and what kinds of activities they facilitate with shoppers. What are some steps we can take to create or reinvent the next generation of loyalty programs? First, go back to the six core needs as outlined above. Second, determine which of those core needs the loyalty program is going to deliver against through an overarching solutions concept. From this point, you can explore the functional and emotional benefits the loyalty program will offer. Engaging shoppers to help co-create or provide feedback on the loyalty program concept and its benefits can help hone your judgment. To help understand which elements work with which shopper segments and retailers, we hold ongoing conversations with some 3,500 shoppers across a range of retailers and classes of trade. When you build these types of shopper interactions into your overall development plan, shopper-centric development becomes less of an afterthought and more of an integrated, iterative and thoughtful process. The next stage is identifying the media and social channels in which you plan to activate the loyalty program. With today’s media explosion, especially in the online realm, understanding the shopper and the media with which they engage is critical. Again, designing the program to integrate these touchpoints strategically and seamlessly, and knowing a shopper’s desired experiential path, will simplify the incredibly complex media landscape. Finally, as you begin to pull the full range of the program together, consider which capabilities you need to launch this program successfully, and which of those could be spun off from the program to generate additional business benefits. Technologies, ad serving, and other capabilities could become as important as the loyalty program itself. With all the pieces in place, it’s time to see if the program you have developed is, in fact, ready to create a highly enjoyable activity with shoppers. Are they willing to repeat that activity? Will they go back to it regularly? Does it win their hearts and minds to such an extent that it becomes a new shopping tradition for them? If so, you’ve fulfilled the promise of the holiday season — you’ve created a new memory for your shopper, something that will live and last, which you can re-live year after year. Happy memory-making.


	SETH DIAMOND is vice president of marketing insights for Catapult Action-Biased Marketing. Previously, he was a senior director of consumer insights and strategy at Kraft Foods.

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