Apr 14 2010

In-N-Out Nation

A while ago I had the pleasure to listen to Brian Parsley, President of WeSkill, give a great presentation on business strategies.  Under the topic of customer service, Parsley spoke of wanting an In-N-Out burger while traveling on business.  Not having a GPS unit, Parsley called In-N-Out’s customer service hotline, where he spoke to a representative who helped direct him to an In-N-Out.  

This example raises several questions. First, how many people do you know who would call a hotline to help them find a fast food burger joint? Second, how many fast food burger joint’s hotlines would have representatives willing to help a lost consumer find the nearest burger joint?  The answer to both questions is probably, “Not many.”  This story doubles as a great example of providing excellent customer service and of displaying significant brand loyalty. 

The publisher of Stacy Perman’s book, In-N-Out: A Behind-The-Counter Look At The Fast-Food Chain That Breaks All The Rules, wrote that “Over time, In-N-Out Burger has become nothing less than a cultural institution that can lay claim to an insanely loyal following.”  To demonstrate the aurora of loyalty that surrounds In-N-Out, in a blog posted yesterday by blogger Nacy Luna titled, In-N-Out Burger Raises Menu Prices, has already generated 191 comments.  A critical reader would expect mostly negative posts.  However, many where is favor of In-N-Out. 

BeachBumBob wrote: I will always pay more if I know that the quality of standards are still the same or higher. When it comes to helping In-N-Out stay in business I don’t mind.

 Christina wrote: In order to keep your business in business, raising prices is sometimes the answer…. let me just also say, that IN N OUT is still going to be the cheapest place ever to get an awesome burger, fries and a shake…. so seriously, its not a negative, its a positive for them…. how would you feel if there was no more IN N OUT….I would cry!

 Talk about brand loyalty, “helping In-N-Out” and “I would cry.”  How many of your consumers would say that about your company or product?  In-N-Out is raising prices in an industry that relies heavily on loss leading “Dollar Menus” to entice consumers, and consumers are okay, even supportive. 

So what is In-N-Out’s secret?  A good place to start may be their consistently exceptional service providing quality products all at a reasonable price.  

Links: www.brianparsley.com/



Mar 26 2010

More To Loyalty Than Frequency?

“You mean there is more to loyalty than just frequency?” YES! In an interview between Mark Vondrasek, Starwood’s senior vice president of interactive and loyalty marketing, and USA Today, Vondrasek described Starwood is looking at factors beyond just frequency in guest says. Referring to Starwood’s new loyalty program, Vondrasek said, “We looked at factors beyond just frequency, which is the key measure in traditional hotel loyalty programs. For instance, we evaluated factors including guest’s profitability, their lifetime growth potential and their ability to influence travel by others. We even targeted some travelers who were loyal not to Starwood, but to our competitors.”

This is one case where Starwood is leading the pack. In what looks to be a future Harvard Business Case Study, Starwood has taken the initial step in welcoming selected guests into their loyalty program. This is where Starwood segregates itself from the pack. Traditionally, hotel guests start off in the lower tiers of a loyalty program and then as their total stays increase so does their standing within the hotel loyalty program. With Starwood, however, it seems that Starwood is welcoming guests with the full benefits of their loyalty program in an attempt to woo hotel guests.

Link: http://content.usatoday.com/communities/hotelcheckin/post/2010/03/starwood-scoop-starwood-hotels-exploring-new-loyalty-incentives-targets-hilton-marriott-hyatt-/1

Mar 23 2010

God of Loyalty . . . and Fortune and War

Napoleon Hill once said, “Lack of loyalty is one of the major causes of failure in every walk of life.”  This quote could very well could be a summary for the Chinese General Guan Yunchang, God of Loyalty, Fortune, and War.  Westerners will likely see the connection between war and fortune, for a powerful country can loot a weaker country during times of war.  In actuality, General Guan Yuchang is a peaceful deity who uses his skills to avoid the confrontations of war. Thus, by avoiding war his country is able to prosper.  This period of prosperity then creates loyalty among the countrymen.  However, not all battles could be avoided.  During one battle when General Guan Yunchang is said to have been captured and forced to decide between switching alliances or facing death.  Holding steadfast to his virtue of loyalty, the General chose the latter.  General Guan Yunchang is traditionally found within Chinese restaurants, displaying a sword and helmet, being serenaded by candles, incense, fruit, and tea.

Link: http://www.gz.gov.cn/vfs/subsite/JGIN7QPB-AZE4-2MTO-EA6G-R281E8V2SFJH/content/content.jsp?contentId=496756&catId=6654

Link: http://www.godchecker.com/pantheon/chinese-mythology.php?deity=GUAN-YU

Mar 19 2010

Life Saving Loyalty

Loyalty is an integral part of forming relationships and actualizing overall happiness.  Jim Becker, a 79-year-old Green Bay Packer fan who has attended games for 56 years, recently learned this lesson.  As a modest man with a wife and 11 children Becker regularly sold his blood to offset the cost of season tickets.  Becker’s doctor later found that his father died at age 43 from a condition of the blood retaining too much iron.  Donating blood is the only known treatment for this condition.  Thus, Becker may have also died at a young age had he not gave blood as a result of his loyalty to the Green Bay Packers.

Link: www.google.com/hostednews/ap/article/ALeqM5jnWvzDeLifn-vP4s_sL3LhOmLLLgD9EE8HVO0

Mar 15 2010

You have a loyalty program?

About two years ago I found the best deal ever, a two year contract for $100 per month “Unlimited Everything” plan with Sprint. I thought, “What a great concept, unlimited everything for a little more than most plans.” The relief of not worrying about going over my minutes each month alone is worth a few extra dollars to me. I am a fully satisfied customer who has never experienced a drop call, inaccurate billing (its always been $100 per month), or any other issues. I tend to use my fair share of minutes and have no intention to switch carriers or plans. Thus, thank you Sprint.

I am a loyal customer. However, despite all my acclaim for Sprint I am perplexed by a 14 page pamphlet I received in the mail today promoting the “one-year anniversary of Sprint Premier,” Sprint’s loyalty program. Over the course of a whole year there was never any introduction or reminder of this program. One may ask what exactly does a loyalty program celebrating its one-year anniversary that a loyal user has never heard of include? The Sprint Premier loyalty program includes a $5 reward or 75 bonus minutes, “Just Because” sweepstakes to shows and golf, early phone upgrades, 25% off accessories, courtesy plan check-up every six months, and inclusion in the Premier Community online forum. In all, a lot included in this loyalty program. While the sweepstakes, early phone upgrades, discounted accessories, and courtesy plan check-up are appreciated, the other rewards are lacking. First, the $5 reward equates to less than a 0.5% reward compared to the annual $1200 I spend with Sprint. Second, the Premier Community online might be great if I feel a strong desire to communicate to other Sprint customers.

Oh yeah, only Sprint customers with individual plans of $69.99 per month, family plans of $99.99 per month, or Sprint customers for at least 10 years are allowed access to Sprint Premier.

Sprint is not alone in offering lacking loyalty programs, many other companies also offer loyalty programs leaving customers desiring more. Three key points to remember when creating a loyalty program as a point of competitive difference is to make sure you offer rewards or benefits that are:

1) Meaningful

2) Perceived as real value added

3) Relevant to or consistent with your products and services

By following these rules, companies can create successful loyalty programs.

Mar 12 2010

From Pudding to Pickles

Why would any firm feel the need to reward consumers with an unrelated service or product in order to increase loyalty? Oddly enough many firms regularly engage in this behavior. Many firms reward their consumers with airline points for consuming their products. One of the first people to exploit this loyalty reward was David Phelps, a 35-year-old Davis, California, engineer who earned 1.25 million frequent flier miles by cleverly exploiting a Healthy Choice promotion that offered air miles for products purchased. Philips ended up with $25,000 to $75,000 in free travel by spending only $3,140 on pudding cups, the least expensive product in Healthy Choice’s brand family. Thus, earning Phelps his nickname as the “Pudding Guy”. Ironically, Phelps did not even consume the pudding cups, but rather he donated them to a local food shelter.

Many more “loyal” consumers have followed the Pudding Guy’s lead by exploiting other offers in order to earn loyalty rewards paid out as through airline miles. According to Wall Street Journal article, Miles for Nothing: How the Government Helped Frequent Fliers Make a Mint, by Scott McCartney, “At least several hundred mile-junkies discovered that a free shipping offer on presidential and Native American $1 coins, sold at face value by the U.S. Mint, amounted to printing free frequent-flier miles. Mileage lovers ordered more than $1 million in coins until the Mint started identifying them and cutting them off.” One patron, “identified by his online moniker, Mr. Pickles, claims to have bought $800,000 in coins.” In all, Mr. Pickles earned over two million miles through American Airlines. Similarly, Mr. Pickles did not use the coins, but rather deposit them at his local bank.

Link to: Miles for Nothing: How the Government Helped Frequent Fliers Make a Mint


Mar 11 2010

Where Does Your Client Loyalty Stand?

Are your clients loyal to you and your firm or to their bottom line?  Donny Deutsch, host of CNBC talk show The Big Idea with Donny Deutsch and author of Often Wrong, Never in Doubt said in his book that, “In advertising, client loyalty is to the bottom line, not to the supplier.”  I am inclined to think that this is true in most industries.  Suppliers of financial services, raw materials, lodging and any other commodity can be replaced.  As Deutsch said, “The buyer can find it down the street better, cheaper, packaged more seductively, and you’re gone.”  To prevent mutiny suppliers will often offer discounts, incentives, terms, promotions, and loyalty programs to increase sales.  In response to this Deutsch asks, “How valuable is your product if you’re willing to discount its value?” 

 Regularly discounting products and services for short term gains may only work in favor of the supplier.  After all, do consumers really want or need to increase their inventory levels just because their supplier is discounting its products or services in an attempt to benefit themselves? Probably not, but consumers can sense desperation and will consume according to their best interest. 

 To break this downward discount cycle firms would benefit by developing mutually beneficial relationships with consumers.  A firm that charges a fair price will not need to discount.  Granted this means for a superior product or service a superior price is justifiable. However, the consumer should never be gouged as this would not be mutually beneficial.  By creating mutually beneficial relationships consumers will come to trust their suppliers and develop a loyalty that transcending a temporary discount.

Feb 17 2010

Loyalty Program or Annoyance Program

USA Today has recently published two articles discussing hotel loyalty programs.  The first article discusses Hilton Hotel’s devaluation of their beloved customers loyalty points, and the second article discusses loyalty programs top complaints.  Neither article presents a pleasant picture for hotel loyalty programs.  One article focuses on taking away a benefit, a form of punishment, while the other article focuses on the loyalty program as an annoyance as opposed to a benefit. 

The author claims that “hotel chains are targeting their most loyal customers because they tend to travel more.”  Is this really the case?  There are several possibilities: (1) a consumer may travel a lot and join several hotel chains loyalty programs as reader, racer03 commented that he belongs to Hilton Diamond and Marriott Gold or (2) a consumer may travel a significant amount and belong to only one hotel chain.  I believe that most loyalty programs target the second type of consumer.  However, these loyalty programs are missing the true value of the first type of consumer who belongs to several loyalty programs.  If the loyalty program was truly effective, then members would not join multiple programs. 

InterContinental Hotels Group’s (IHG) Chief Marketing Officer for the Americas region, Eric Pearson, strongly believes in IHG’s loyalty program.  Pearson makes the assumption that “an average-level PCR [IHG’s loyalty program] member is twice as profitable as a non-member, and an elite-level member who stays more often is 12 times as profitable than an average member.”  The logic that high volume consumers are profitable is a misconception.  A strong inward cash flow does not equal a profit if there is an equally strong outward cash flow spent on  loyal consumers through perks, rewards,  and discounts.  In reality, an average consumer who may not create the most revenue, may be the most profitable.  

USA Today Articles:

Loyalty Programs: Study Reveals Top Complaints; Spam Tops List http://content.usatoday.com/communities/hotelcheckin/post/2010/02/marriott-rewards-hilton-hhonors-intercontinental-priority-club-rewards-choice-wyndham-loyalty/1

 Will Other Hotel Chains Follow Hilton in Devaluing Loyalty Points Next Year?http://content.usatoday.com/communities/hotelcheckin/post/2009/11/will-other-hotel-chains-follow-hilton-in-devaluing-loyalty-points-next-year/1

Dec 5 2009

What do women bring to the table?

Arnold Schwarzenegger’s wife — California’s first lady — Maria Shriver’s website just featured Lerzan Aksoy about what women bring to the table.  Please go to Shriver’s website to read Why Women are Missing on Corporate Boards at http://www.californiawomen.org/mia/

Dec 5 2009

What’s your mission statement?

A mission statement defines what an organization is about or aspires to be about.  An organization’s culture, goals, and policies are derived from its mission statement.  Many organizations, corporations in particular, are in business to create value for shareholders.  Logically one would then assume that a corporations mission statement should reflect its goal to create value for shareholders.  In theory this makes sense, but in practice could a manager deny a consumers request based on the grounds that the request would diminish shareholder value without upsetting the consumer?  The book Loyalty Myths suggests that not all consumers, even loyal consumers, are profitable and that in fact  a firm may benefit from turning away conspicuous consumers.  However, the real challenge is converting a non-profitable consumer into a profitable consumer.  Providing superior value or added value to the consumer will assist in converting a consumer. 

Loyalty at its essence is about sticking with one another.  It means that organizations, such as firms, shareholders, and consumers, strongly intend to keep the relationship going and envision a future together.  Thus a firms mission should be to create value for shareholders by creating value for consumers. 

By contrasting two apparel firms mission statements it becomes clear that a firm can bring value to both shareholders and consumers.  First, Zappos appeases consumers by delivering “WOW through service” and appeases shareholders by pursuing “growth and learning” and  doing “more with less.”  In contrast, Foot Locker states its mission is to increase “value for our shareholders” by enhancing our base business,” generating positive cash flow,” and “redeploying excess cash.”

Which company would you want to invest in as a shareholder, buy from as a consumer, or work for as an employee?

Zappos Mission Statement: As we grow as a company, it has become more and more important to explicitly define the Zappos core values from which we develop our culture, our brand, and our business strategies. These are the ten core values that we 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

 Foot Locker Mission Statement: We remain committed to increasing value for our shareholders by:

  • Enhancing our base business
  • Expanding in the global marketplace
  • Pursuing new business opportunities
  • Generating positive cash flow
  • Redeploying excess cash