Tuesday, November 3, 2009

NACCM 2009: PANEL SESSION: Leading Loyalty Amidst a Disruptive Business Environment


Rudy Vidal, Vidal Consulting Group


Jill Noblett (JN), recent Senior Vice President, Loyalty & Direct Marketing, Wyndham Hotel Group

Dan Wiersma (DW), recent SVP, Service Platforms, Sony Electronics

Megan Crowley (MC), Director Market Research, Norwegian Cruise Lines

Chris Moloney (CM), Chief Marketing Officer, Scottrade

Concept of the panel:

The idea of loyalty is changing. What are we doing differently that’s working.

Definition of Customer Loyalty:

A personal commitment to re-purchase and recommend, that resists normal competitive market pressures

Is loyalty more difficult to attain now than it used to be?

JN – Yes. People are more price sensitive. So we have to consider price, but figure out how to add as much value as we can – now we have to blend the two.

CM – One measure of loyalty is resistance to price sensitivity, but I’m not sure I agree with that anymore. The drivers are changing more dramatically.

There’s a difference between attitudes and behaviors. The marriage of these two are difficult.

DW – The fundamentals haven’t changed. Things like commoditization, the ability to replicate another company’s product or service has changed dramatically in our lifetime. That makes it more difficult to do what we have to do. I’m a huge Southwest Airlines fan. A few weeks ago, I got stuck in Phoenix due to weather in San Diego. Southwest was very responsive, took great care of us, even though it wasn’t their fault. I will fly them forever. They treated me as a person. That fundamental hasn’t changed.

MC – For us, the cruise industry, the experience is very long-lasting. For us, the experience is much more important than the price. We’re focusing on the experiences that are critical to our customers. With less money, we have to focus even more on those things that are most important to our customer.

AUDIENCE – Visibility & availability. Easy to get instant gratification now.

Speak to the empowerment of the consumer:

CM – It may be harder to overcome the price barrier. It changes the spectrum on how you have to overcome the price barrier. There’s only one price leader in any category. Everyone else has to differentiate another way.

What Southwest does so well is service recovery. Maybe right now somebody in your company is delivering bad service. How you resolve that is key!

JN – How do you add value to the price point? In Wyndham brand, we allowed customers to get some personal preferences if they fill out a profile for us. Even though we may cost $20 more, some of these people feel that the personalization is worth it. Sometimes the equity people build with your brand they don’t want to lose.

What creates loyalty?

MC – For us, it’s about the experience. We don’t have a very good loyalty program (from a traditional standpoint). We do understand what’s important to our customers and we try to deliver that. Our next step is to build a more robust loyalty program.

AUDIENCE – Anytime you have a touchpoint, you have to make sure the culture of service comes through.

DW – I agree completely. There are a multiplicity of things that drive loyalty, but the touchpoints of your company, both directly and indirectly are important. I asked different departments: legal, accounting, etc. if they knew how they impacted the end customer. Many of them didn’t know. At Southwest, every single person knows how they affect the end user. So what drives loyalty, as I found at Sony, is getting the linkages with everyone in the organization so they understand that what they do impacts the end customer (even the legal department – think about the legal speak they make customers read).

What is the role of the organization to creating loyalty?

CM – If people don’t identify themselves as part of the company – like saying “we” when referring to themselves in the company – the service level might not be what it should be. They won’t seem as empowered as they should be.

I will throw a wrench in it, though. Most of my friends are loyal to Apple. They’re off the charts for loyalty right now. Harley Davidson has like an 85% net promoter score. People want to be loyal, they want to be impressed, they want to have a good time. They want us to overdeliver. It’s not a situation that’s going to go away. People want to talk about your company.

The drives are probably different for each company, but it starts with overdelivering on the product.

JN – You can have great service, but if the product is flawed, you’re going to have problems. You may be loyal to a certain hotel, but if you find bedbugs, you’re probably not going to go back, or you’ll wait a long time before going back.

AUDIENCE – The opposite is true, too. What I want to know is that everytime I check into a Wyndham hotel anywhere, I want to have a consistent experience. People want good service and good product to be consistent.

JN – A lot of people talk about Zappos, but they’re all in one location. The culture and values can be easier to manage. It’s harder with a company that has many locations.

CM – I’m behaviorally loyal to my airline because of the loyalty program – I’m platinum. I expect a certain level of service for that. When I travel on another airline, I kind of expect to be kicked around.

You cannot deliver an extreme level of service to everybody. Southwest has finally joined the bandwagon and created a tiered level. We all know we have to treat our best customers special, but that can’t hurt the others.

DW – Back to the hotel example, I really like to be greeted at the front desk. My co-workers don’t care about that. We went to a hotel with an express check-in. My co-workers liked that. I felt dissatisfied because I like the interaction.

If you’re used to an environment being a certain way and it turns out different, that can be very disappointing. You have to look at how different people want things.

There’s a vicious circle of delivering what we can deliver, which attracts a certain customer. What about the others that want something different?

AUDIENCE – Let’s use the power of analytics to adapt our loyalty programs and our service models so you can tailor it to what each customer wants it to be.

JN – It depends on your product. It comes back to the drivers. What is that you know about the customer that makes them loyal?

CM – The next step would be to create a service differentiator. Can we group people into buckets? Some companies do “personas” that help understand what the customer wants.

JN – Wyndham creates personas. It was about how we presented the marketing to them. If you wanted points, we could talk to you about points. If you’re a leisure traveler, we’d talk to you a very different way.

DW – Some companies are doing exactly that. They’re having a conversation with you, then you can go somewhere else in the world and they can pull up the information on you (i.e., Ritz Carlton).

AUDIENCE QUESTION – If people fit different slots (ABC), what can you do to move people up the chain? And how do you keep the “A”s from feeling like they’re not special anymore?

JN – We moved people up the value chain through a lot of education and communication – helping them to understand the brands, what we have to offer. Sometimes they got special offers, etc. As we got to the higher levels, we tried to figure out ways to recognize them and get more share of wallet at the same time.

Sometimes we would move people up, or keep them around, even if they were a little short on points. That keeps them engaged and “hooked.”

CM – Sometimes they don’t know they’re in a loyalty program, or what level they are. You have to communicate that to them. You have to constantly learn from your customers about where they are, what’s going on with them, and how things have changed in the past year, you can move them up or down the value chain more easily.

MC – We have a much higher price point product, so we’ve done a lot of work to figure out what makes people purchase 2, 3, or 4 times. Once they’ve purchase 5 times, they’re loyalty goes through the roof. So we focus on how to choose the 2nd or 3rd purchase.

Chris, are you loyal to your airline brand, or are you loyal to the points?

CM – I’m hooked because they’re “my airline.” And I have a status with them (Platinum). If they had the exact same policies as Southwest, I’d go with Southwest due to the service.

Are customers loyal to the hotel brand or the points?

JN – You have to wonder if once you’ve created these points program or other program, have you created a monster? Maybe. But if you look at it like you’re giving them something they value , would they stay with you because they’re invested, even if you’re not perfect? That can change over time. I might make a different decision when I’m on business vs. being on vacation vs. when I’m visiting my grandparents. It’s more about what the person is desiring. Understand what they value, then give it to them.

AUDIENCE QUESTION – Can you share some lessons learned from loyalty programs?

DW – We’re not a steeped in loyalty programs as hospitality or airlines. We looked for the highest level of repeat customers and we gave them a “backstage pass.” If you’re close to a Sony store, you can get special stuff at the store. Almost nobody took us up on it. We sent it out to 250,000 and we had only 1000 people take us up on it in a year. We know that people are not as loyal to Sony as they used to be. We thought it would be great because we thought customers would really love the service enhancement.

What was it about that program that didn’t work?

I don’t really know. The flip side, though, was we came up with a program that’s not a loyalty program, but an enhanced services program. Customers loved that. They could come to a store and talk to somebody face to face in the store when they had a problem.

CM – A bank customer tried to do points based on overdraft fees because they’re the most profitable customers. Another bank gave points for ATM deposits. It ended up creating unbelievable lines at the ATM. A utility company tried to create a program that would incent people to use more power by leaving stuff on when they weren’t in the house!

JN – One of the things we didn’t do well was to set expectations properly with franchisees, etc. It took us a couple of years to create a dashboard for them to see the effects of the program. Calibrating those expectations is important.

Internal alignment and the understanding of the organization is important. We had a lot of technology infrastructure, we had to convert a lot of customers, etc. Sometimes we did that too quickly and we didn’t follow our own best practices. Those were learnings that were ongoing. There’s the famous expression, there’s never time to do it right, but there’s time to do it again. Take it slow and do it right.

MC – Our loyalty program is auto-enrollment. Now we’re getting to a point where we have a giant database of people that are pretty much inactive. We’re likely moving to a system that is more opt-in because those people will be a lot more active. Our direct marketing people are scared of losing their giant list, though.

What are you doing differently now than you were before?

MC – First, understanding the things that impact loyalty. Next, focus on the things that are most important. This helps get everyone excited and rally around those things when they’re prioritized.

What we’ve done recently is start with the customer. 80% of our sales go through a travel agent. So even though we touch the end customer, they purchase before we ever meet them. So we have to understand what drives the travel agent. What are the key drivers for them, so we can focus on the most important things for them, too.

Third, what makes employees excited and loyal? Same thing.

If we have loyal customers, loyal travel agents, and loyal employees, we’ll do great.

Is it a problem to “compete” with travel agents with your direct business?

MC – We need the travel agents. We love the end customer. We have to have both, but we can’t deny the travel agents.

Chris, what are you doing differently than you were 5 years ago?

CM – When you look at your business, 10-30% of your business can come through referrals. Get a hold of where referral lives in your business and figure out a way to maximize your referral program.

The people who make referrals to make referrals to people like them. So, high value customers are important to get referrals from.

AUDIENCE – How do you handle the difference in the increase in emotional loyalty?

DW – We recognized that the emotional piece was critical to loyalty. We started to do it base on the call center. When you’re calling a call center, you’re usually not happy. We started to rate emotions. We have your info and we can rate the experience based on what happened last time. We made it as simple as a frown face, happy face, or face with a straight line. We told our agents to not worry about how much time they were on the phone, but instead taking care of the emotional need of the customer.

We also employed skill-based routing. If I made you happy last time, we’re going to try to route your next call to me to take care of you.

AUDIENCE – I’m in healthcare and one of the things we’ve learned in healthcare is how to be “sensitive” to a person’s needs. And in healthcare, we have to change our hats all the time based on the medical need.

Jill, what are you doing differently now?

JN – When you’re dealing with 7000 franchisees, it’s hard to get consistency. Over the past few years, the company at large has made a shift to be more customer-centric. It’s interesting challenge because the “company” doesn’t deal directly with the customer. From a very basic standpoint, the organization started to align it’s technology so we can get an accurate picture of the customer and know what’s happened with them on previous visits. We obviously focus on retaining customers.

From a loyalty program standpoint, we tried to be relevant to our customer, meaning we tried to find things that were important to them and customize our offers, etc. to address those things. Also we tried to go deeper into personalization.

Give us something you learned that was key to making loyalty work:

CM – Net promoter score. I used to market against it. Now I’m the biggest proponent.

MC – For us, it’s listening to customers, then modeling it to them and prioritizing.

DW – I’m a huge proponent of NPS. Alignment is critical. In order to have a successful loyalty program, you need alignment of marketing, sales, etc. Without it, you struggle. Lastly, the significant impact your people have on your customers. Empower them to do things.

JN – Showing metrics and ROI as soon as possible gets the company behind the effort as quickly as possible.

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