1. The cost of storing and managing large volumes of customer data will continue to reduce dramatically.

The advent of database appliances in recent years has dramatically altered the price performance of managing large data volumes and has made it affordable for smaller enterprises, and departments within larger enterprises, to replace transaction-oriented databases such as Oracle with more appropriate specialised decision support engines at an affordable price. This development has also simplified database design as it is now possible to build complex dimensional schemas with link tables where everything is joined to everything without the need for a normalised layer of data in the data warehouse. It also makes it possible to dispense with complicated workarounds to compensate for deficiencies in the database engine. In addition, the performance of the new generation of data warehouse databases makes it possible to dispense with the traditional ETL tools and to perform push-down processing in the database using SQL. All of these factors combined will have the effect of simplifying the challenge of designing, building, maintaining and justifying the cost of a data warehouse infrastructure to support the customer intelligence applications required to discover the valuable customer insights that drive value in the marketing process.

2. Macroeconomic factors will drive renewed focus on customer intelligence and loyalty programs

Economic stagnation arising from sluggish growth and high unemployment in the advanced economies over the next four years will give rise to an increase in negative social mood with dramatic consequences for the practice of marketing. With low organic growth (and the near complete cessation of M&A activity) customer acquisition and retention will become obsessional survival strategies for most business enterprises. This will place a premium on (a) customer insight analysis and (b) the consumer demand for value (i.e. discounts and rewards) will lead to renewed focus on loyalty programs.

3 Market consolidation of IT vendors will simplify the marketplace and create formidable barriers to new entrants

The past two years have seen most independent BI vendors of reporting and analysis tools, data mining tools, data cleansing tools, ETL tools and other specialised utilities acquired by larger vendors. Three major vendors – IBM, SAP and Oracle – now dominate the BI landscape marking the end of the entrepreneurial phase in the BI market. What this will mean for businesses is a welcome simplification in the evaluation and selection of technologies as well as a reduced focus on the need for systems integration. On the negative side it will lead to 3 competing incompatible standards evolving during the course of the year and, despite vendor assurances that they will maintain openness and compatibility of tools, it is highly likely that businesses will have to consider aligning with one of these standards and bear the associated costs of replacing and reconfiguring existing components of the BI infrastructure in the enterprise. In addition, it is possible that organisations will be faced with less choice and innovation in the market and the possibility of being locked in to proprietary IT solutions.
4. The shift from above-the-line to below-the-line marketing will gain real momentum as the year progresses

Market fragmentation will be a major theme for 2012 and the battle for marketing budget will see significant advances made in below-the-line marketing investment as more and more firms realise the futility of a one-size-fits-all brand strategy in the current market environment. The challenge for most firms will be to strike a balance between customer analytics and brand marketing. This transition has been happening slowly and steadily in recent years and is now close to a tipping point. There are many drivers of this change but the most important is an increase inconsumer socio-demographic and lifestyle complexity. Social media may just be another marcom channel but the prevalence of social media will place new emphasis on deploying durable segmentation models to address discrete groups of customers.

5. Obstacles presented by the lack of organisational ownership of the customer information resource will become more intense and there will be a growing demand for a standard customer information framework and standard customer data architecture

The challenge of exploiting customer information has always been inhibited by the lack of clear ownership and governance of the corporate data resource. This problem has been largely resolved elsewhere in the enterprise but remains pernicious and acute in the marketing function which is immature in terms of IT, performance measurement and process standards. Many customer information exploitation projects founder because of the absence of a common framework for building customer analysis applications that are integrated into the marketing business processes in the enterprise. Many projects fail to integrate the many different marketing activities or fail to integrate the many separate isolated applications that are developed by different business units within the marketing and sales departments. Now that the technology issues that have acted as inhibitors are getting addressed there will be a growing demand for a comprehensive customer information framework that allows senior business sponsors to manage the implementation of an end-to-end customer analysis capability. This year will see the emergence of the first proper methodologies for the implementation of customer insight capability encompassing sales analysis, campaign analysis, loyalty and value analysis, customer segmentation, marketing communications and customer-facing relationship management capabilities.

The courses were well attended with over 100 Indian companies sending
delegates from their marketing and CRM departments. The vertical markets
included retail, financial services, FMCG, insurance, fuel retail,
utilities, motor manufacturing, telco and specialist retailers in fashion,
leisure etc. The events were co-sponsored bu AimiA, Mobiquest and Accentiv
and these companies formed a panel at the end of the 3 day course when they
took questions from delegates and gave their thoughts and opinions on
loyalty in the Indian marketplace.

I was very impressed by the enthusiasm and appetite of the delegates to
learn about what is happening in other parts of the world, particularly in
respect of coalition programmes. India already has the Payback (I-Mint)
programme but both Loyalty One and AimiA are in the process of launching
their coalition models. My message to the delegates was to learn from the
many mistakes that have been made around the globe and to recognise the
necessary focus on data analysis in order to build strong customer
relationships. The first day of the event was a Masterclass in Customer
Management whereby the delegates saw presentations on the meaning of
loyalty, loyalty marketing techniques, business models with case studies on
proprietary and coalition programmes from several vertical markets. I also
presented a detailed analysis on how coalition programmes work together with
an analysis on “Why Programmes Fail”. The delegates were then split into
groups and asked to design a loyalty programme for various markets e.g.
Coffee Shop, FMCG and Fuel Retail. The delegates then presented their ideas
and the group discussed the results. This created a great deal of excitement
and interest and helped create a lively and interactive few days.

I was able to gain a real insight into the Indian marketplace, in particular
in respect of the cultural issues faced by loyalty practitioners and I have
to wonder if the Indian consumer is ready for a “western style” programme.
Aimia believe the consumer is ready but that many Indian businesses are not
convinced and are hesitating. There appears to be a real need for education
of the consumer and more focus on engagement and redemptions as there are
many Indian consumers joining programmes but activity is poor with figures
of around 20%-30% being quoted!

Feedback from delegates was very positive and the training has provided some
real guidance to many companies already operating programmes or thinking of
launching or joining one.

A follow-up event is planned and I personally look forward to seeing how the
Big 3 develop their programmes in this highly fragmented and nascent market.
Do not underestimate the Indian consumer nor the Indian businessman.

Mike Atkin
March 2012

Chris wrote about his approach to New Year’s resolutions in this post, instead choosing 3 words that would help him to focus on what’s most important for the year ahead. I like the idea and am still trying to reduce my personal list of keywords to single digits. Meanwhile, I found it easier to create a 3 word list for Loyalty Marketing in 2012 and wanted to share it for your consumption and discussion.

Let me know what your 3 words would be for this year and why you chose them. I’ve started a discussion on our Customer Strategy Network Facebook page and in a few LinkedIn groups where you can participate. If you prefer, just leave comments here on Loyalty Truth.

Data

Loyalty marketers have been collecting customer data since the dawn of the business. To a great extent, that data has been under-utilized and this shortcoming threatens the trusted relationships we have with our customers. Consumer 2.0 is well aware that the portfolio of transaction and personal data that defines self is highly valuable to corporate America. Though we’ve been talking about increased leveraging of data as one of the biggest opportunities in Loyalty Marketing, 2012 might be the year that it happens.

Selecting Data as one of my 3 words for 2012 puts me in pretty strong company as I recently listened to Rupert Duchesne, Chairman of Aimia, speak about Data being the “New Oil”. And, just last week, I read that Foursquare was making public its intent to put its data to work as a tool for growing its business in 2012.

Mobile

The mobile handset has been predicted by many to become the central platform for social shopping and payments. The Google Wallet was announced last year and payment/loyalty plays including Square, Dwolla, and LevelUP seek to change consumer behavior and set a new mold for how we shop and pay.

Banks are pledging to make better use of mobile applications to bring banking products closer to the customer, in the process redefining how we view the retail banking customer experience. Groupon has responded to criticism that it is impotent beyond stimulating customer acquisition and trial and has introduced Groupon Rewards as well as partnering with Foursquare to find synergy in location based marketing and the daily deal.

The convergence of loyalty, payments, and the mobile handset will continue at a faster pace during 2012.

Social

We invested significant time gathering information and creating position papers on Social Loyalty, Social CRM, and Social Shopping during 2011. Clients as well as conference delegates wanted to absorb as much as they could on these topics and the buzz made us question if everything involving “loyalty” and “social” might dissolve away as just the latest marketing fad.

It’s not going to happen. In fact, 2012 will be the year when many brands put their PowerPoint presentations on the shelf and move to implement more social channels into their customer strategies. Consumer 2.0 is making purchase decisions differently than before and will be delighted by elegant ways to locate and evaluate local shopping offers via their mobile device. The social aspect comes in the form of interactions via social shopping networks like Zavee.com or by engagement with game-fueled loyalty programs where referral and recommendations lead visibly to purchase.

Three words that will define Loyalty Marketing in 2012: Data, Mobile and Social. I’m sure you can make an argument for others.

Let’s hear it.

By Roger Williams

Gamification is defined as “the use of game mechanics for non-game applications”. Businesses are making their websites and applications feel less like “transactions” and more like games – although some will argue that you can’t put lipstick on a pig. Perhaps some transactions, like filing your taxes, are destined to be purely arduous, no matter how many virtual accolades, points, or medals you earn.

However, the true paradigm shift of gamification, is that it places more emphasis on product education and behavior-modification by rewarding these non-payment transactions. Reading advertisements, completing surveys, meeting deadlines are all examples of customer actions that can be considered as loyalty gamification. Frequent Flyer programs inherently have game-like qualities, but gamification of these programs gain the best results from rewarding a variety of pre-sale behavior.

FFPs have been ‘Gamifying’ for years with tier recognition
On your next trip to the airport take some time to observe elite frequent travelers and you will quickly appreciate the power of loyalty gamification – which incidentally FFPs have been executing successfully for years. Never taking the time to actually sit in the waiting area, elites like to impatiently stand close to the boarding door so they can fully exercise their right to board first, or at least immediately after first class. The whole thing can appear quite ridiculous in hub cities where 60 elites jockey for position to enter the Jetway first, all while passive-aggressively brandishing their credentials attached to their roller bags.

Managing elite status through gamification in many cases is more powerful than point accrual. Perhaps the biggest secret to successful elite status marketing lies in the takaway.  Every elite wants to keep their status and will go to extreme measures to do so  – all generating revenue for the airline. Barriers, like elite qualification, placed between the customer and rekindling a favorable experience that they have become familiar with can be a powerful leverage tool.

Customers inherently lack self-image and identity
Most people don’t give much thought to who they really are, especially if they are career-oriented business types. Sure, your average doctor knows he or she is a doctor, but is that who they really are? More people are allowing their careers to define their very existence, and in the process lose their own identity.

Video game creators cringe at the emerging use of gamification within marketing and loyalty circles. The primary criticism of top video game designers of gamification is that it lacks storytelling, a critical component of successful video games. In fact, storytelling is the next logical step in profile-driven loyalty marketing. In practice marketers are not concocting some fantasy, but instead using customer data to create the customer’s identity and a narrative for the customer’s new self to play in.

Most people are actually consumers, unwittingly floating in an artificial dimension of commercialism that marketers have created. Think of it as marketers being performers in a nightly Broadway show with a full house every night.  However, peoples’ opinion of that show is the only thing that matters.  It is then up to you to deliver a performance that engages, stimulates, and triggers the audience to give critical acclaim to your work on as many nights as you can.