The new year has begun. Now is the time to measure the success of your holiday campaigns. How did your campaigns perform? This is an opportunity to look at their effectiveness in terms of building awareness, generating revenue, increasing retention and aiding customer acquisition? How do your metrics compare to industry benchmarks as well as internal benchmarks? How much revenue did they generate and were they profitable? In addition, what worked and what didn’t? Now is the time to evaluate any tests that were done - date/time, subject line, creative, etc. Finally, compare the results of this past holiday campaign to the one before and analyze the differences. The insights from the holidays can inform your strategy for 2012.

I was driving by a shuttered Blockbuster store recently and naturally I thought about disruptive technologies.

When VCR tapes first became popular, Mom and Pop stores started catering to a newly created market for movie rentals.  I remember the excitement of being able to rent movies and, for a time, the video store became the place where you regularly saw friends and neighbors.  Then Blockbuster came along and pushed those small stores out of business.  The selection was better and you could keep the movie for a few days.  Now Blockbuster has been shoved aside by Netflix, despite launching its own website and providing a similar service whereby you receive and return DVDs by mail.  With its bankruptcy and later sale to Dish Network, Blockbuster and the video rental store has been officially rendered obsolete.

Now Netflix offers on demand streaming video of movies and old television shows.  They have also announced deals for original content.  Blockbuster was too slow to evolve and see the value of a flat fee subscription service and the convenience of mail.  Netflix has taken the concept of video rental and is now becoming an important distribution channel and could possibly complete with cable channels for content.

Every business needs to beware of disruptive technologies that will render its business model obsolete or redefine the market.  You never know where the threats might come from or how much time you will have to react to them.

The recent discussions about parents promoting academic achievement had me thinking about what it means to be successful in the workplace.  In case you missed the Wall Street Journal’s article, “Why Chinese Mothers Are Superior”, let me briefly summarize.  Amy Chua writes about how she restricts her daughters’ activities (no sleepovers, play dates, school plays, TV or computer games) and requires that they get all As in school, be the number 1 student in every subject except gym and drama, and that they play only the violin or piano.  Her point is that parents who raise successful children stress academics and tenacious practice.

However, what is the effect of promoting academic skills at the detriment of social skills?  During play dates, sleep overs and other extracurricular activities, one learns important skills as well.  Most workplaces require that you work in teams and to be successful you must be able to collaborate and work well with others.  That means you need to be able to understand and deal effectively with a range of personalities.   It starts on the play ground and continues during play dates and sleep overs.

Social skills are also needed outside of work.  For example, in business school I was assigned to a team of fellow students during my first semester.  There was no hierarchy but we had to work together to effectively learn and manage our considerable workload.  Since no one person had positional authority, one needed persuasion, negotiation and hard work to insure that the team met deadlines, allocated tasks, and helped each other.  One of my proudest moments was when a team member asked me to edit a team paper because he thought it could be improved upon.  He valued my insight and recognized that I was an effective team player.  Even though I had not been assigned to write this paper, I would help the team out.

Stressing academics will result in educated individuals.  However, to effectively work well in an organization, you often need more than education and technical knowledge.

Much has been written about the value of Groupon and its power to drive traffic to participating retailers.  The hope is that new consumers will try your store and buy additional items, above and beyond the promoted item or coupon threshold.

However, what if consumers come to your business and simply buy the item on offer?  The Wall Street Journal recently reported on a toy retailer that had offered $20 worth of merchandise for $10.  Most consumers bought just the minimum amount needed to redeem the coupon.  According to the Journal, the toy company lost money on 75% of its Groupon sales.  Further, most of the customers who used the coupon were existing customers.  While this is just one story, it is a cautionary tale.

It is important to drive incremental trips and often coupons, discounts, and loyalty reward certificates are an effective means of doing so.  However, it is also important that these trips at least break even.

As I mentioned in my prior post, loyalty programs are a valuable tool.  They can help retain customers and companies can win greater share of wallet as a result.  If a customer can buy the same goods or services from multiple sellers, a loyalty program encourages customers to consolidate their purchases.  It might also create additional demand.  For example, a reward certificate can spur an incremental trip or customers may splurge in order to meet a spending threshold.

Another benefit of loyalty programs is the insight into customer behavior.  This has far reaching benefits.  Take the example of a retailer.  This customer insight can help both marketing and merchandising.  Using the data collected, a retailer can segment their customers based on past behavior so that they can tailor their messages and offers appropriately.  For example, marketers can use this information to personalize product promotions, cross-sell products and identify new customers that have the potential to become to best customers.

Further, this data will provide insight into what products bring new customers into the store, what products drive repeat purchases and what products are typically purchased together. Merchandisers can use this information to plan promotions and make buying decisions.

To be valuable, the data must drive actionable insights and be used to continually improve the loyalty program.  I will write about using data to evaluate the health of a loyalty program in my next post.

Loyalty programs can drive revenue and result in actionable insights.  Done properly, a loyalty program can foster customer retention, increase share of wallet, and drive incremental visits and purchases.  It can also provide valuable intelligence into customer behavior to help target promotions.

The currency of the loyalty program can vary.  Financial loyalty programs often offer preferred services based on tiers tied to the amount of your assets or investments with them.  Credit cards typically offer points based on purchases but the Discover Card gives cash back for example.  Shaw’s grocery stores and CVS drug stores offer discounted pricing on selected items, similar to coupons.  Airlines offer miles that can be redeemed for future airplane tickets.  Some retailers offer reward certificates after reaching a certain number of points.  For example, customers receive a $10 reward certificate at A.C. Moore after earning 200 points.

The goal of any loyalty program is to drive a specific behavior, typically purchasing goods and services or investing money.  Thus the program is structured to encourage incremental spend and increased share of wallet.  The program might award double points for purchases of $100 or more, causing you to splurge on your next purchase.  Alternatively, you might receive better service from a financial services firm if they hold all your assets because of the threshold amounts needed to attain various tiers.  Multi-tiered programs that airlines and financial services firms have accomplish this by providing additional benefits with each additional tier attained.

Loyalty programs must provide value to both the customer and the business.  Thus, the loyalty program must provide something to the customer that she believes is valuable but that is not too costly for the business to provide.  Not all customers will redeem their rewards and some rewards cost nothing so assessing the profitability of the program requires more than a back of the envelope calculation.  The trade-off must be considered carefully.  Make the reward too easy to attain and you may put at risk the profitability of the program.  If you make the reward too difficult to attain, customers may sign up initially and then drop out.   I have seen customers splurge to achieve the first reward certificate but they do not sustain that level of engagement afterward.  The program did not sufficiently incentivize certificate redeemers.

Lastly, you must also be careful that you have considered possible unintended consequences.  For example, it may be loyalty members are only buying discounted or low margin items in order to earn a reward certificate.  Once they receive their reward certificate, they may spend just enough money to redeem the certificate and no more.  Alternatively, cashiers might be scanning in their own loyalty cards or a dummy card when customers do not have a card or do not have their card with them.  Your loyalty program might be rewarding unprofitable customers or non-loyalty customers.

I was preparing for a meeting with a software company and found myself analyzing their industry using Porter’s five forces.  This is a framework for understanding the dynamics within an industry.  Also, the rigor of analyzing an industry makes you stop and first define the industry.  It sounds simple but can often be complex.  If there are multiple audiences or multiple products, you might want to do the analysis on each.  Next, it requires that you consider vendors, customers, and competitors.  In my first semester at business school, I must have done this exercise at least once a week. 

Years later I could not believe that I was still using this framework but I found it useful in preparing for my meetings.   One of the questions in the software business is who owns the customer?  If the software is sold via a value added reseller (VAR), then they may own the relationship.  Knowledge is power and the VARs may have all the power.  The VAR may know when the customer is likely to want an upgrade, add new seats or licenses, or purchase additional software for related business processes. 

If you are starting to work on a new industry or a new project, consider using the Porter five forces framework.  It can help you get to the heart of the strategic challenges within an industry.

I recently received a mailing from the deCordova Sculpture Park and Museum, formerly known as the DeCordova Museum and Sculpture Park. 

I was puzzled by the name change.  In this case, why would you essentially just reorder the words in the name?  Yes, the sculpture park is beautiful and unique in the metro Boston area.  It is well worth a visit I might add.  However, the museum is excellent as well.  There was a fascinating exhibition called Drawn to Detail which I saw last fall. 

Perhaps, the ICA in Boston is cornering the contemporary art museum “market”, with the recent Shephard Fairey show and before that an Anish Kapoor exhibition.   It also has received a lot of attention for its new building and new location on the waterfront in Boston.  The deCordova’s name change might be a bid to distinguish itself from the ICA.  If that is the case, I am not convinced that re-branding is the answer.  But if you are going to re-brand, at least be consistent. 

The website uses the new name at the top on the right…

The top of the deCordova home page

 and then uses the old name under the History and Mission title.

Bottom of deCordova home page

I was recently in Austin to give a presentation and I joked with the client that what would really make me happy would be if they used my results.  Routinely I find myself fighting against the option to do nothing.  Even during final presentations, when the work is done and paid for, I find an unwillingness to change the status quo.  Rather than battle the silos, the culture, or the project approval process to put in place recommended strategies and tactics, it is easier to put the final report on a shelf and call it a day. 

On new business pitches, I worry more about inertia more than I do the competition.  Has the client or prospect really committed to making changes to their business?  If so, we can have a discussion about the many ways to solve the business problem at hand.  If not, there is little I can do if someone is unwilling to commit time or resources.

The print edition of the Wall Street Journal has introduced a daily sports page and when I say sports page, I mean it is just a page.  It seems like an odd choice, introducing more sports coverage to a business oriented newspaper.  However, it may be an attempt to increase advertising revenue and grow the subscriber base, similar to the earlier introduction of the Weekend Journal.  

The sports coverage is supposed to be analytical, high-level and statistical.  That does not mean it is dry.  I laughed out loud when I read this excerpt from yesterdays’ journal, written by Bernie Lincicome.

“The visual highlight of the week was Henrik Stenson, a particularly tidy sort who avoided splashing mud on himself by taking off nearly all of his clothes.  It takes a lot to upstage Tiger Woods, but a Swede golfing in his skivvies in a water hazard will do it every time.”