Great Brand Apps Create Loyal Happy Customers

Mobile apps are the way we will interact with all of our loyalty programs in the digital age.  Smartphone apps can do so much more than a piece of plastic or punchcard could have ever imagined, yet so many companies have built half-baked, poorly thought out attempts at creating a customer experience.  But the good news is there are some leaders that are nailing it.

The 4 qualities a mobile app should possess are:

A mechanism to capture transactions 

At the heart of the mobile experience should be the mechanism to capture data about the customer.  This data should feed into the loyalty program of the brand.  This should come in the form of transactional, interests, surveys and geo location data.  Data is the building block for a loyalty program to succeed.  

Frictionless transactions

A mobile app has the ability to eliminate the frictions of the transaction.  For example, at an Apple Store the customer can enter the store, open the app, scan the item they would like to purchase and then leave the store, all without having to interact with a human or wait in line.  That is eliminating friction.

A mechanism to communicate with your customers

Mobile is a channel.  It is perhaps the most important channel in the new digital marketing era.  The phone is always on your customers body and that will soon include wearables.  The ability to push messages to your customers through this channel is extremely important.  The ability for your customer to open the app and see their loyalty program details makes communicating with your customer more personal than ever before.  This includes beacon support to guide the customer through the offline experience as well.  This should be the channel that receives the most focus in the coming years.

An engaging experience without a transaction

Mobile apps hold a space on the customers phone.  If you make your app engaging, even when the customer is not making a transaction with you, you may keep a good position on the phone.  Think of it as search rankings, the more prominent position, the more engagement with your brand.  Get stuck in a folder on the third page, you will only be utilized as a mechanism for transactions which is not the worst thing in the world, but doesn't drive behavior. 

Starbucks has been on the forefront in the mobile app space since it introduced its mobile app in 2011.  Starbucks took the approach of creating an app that engages customers when not in a Starbucks, along with making the transaction process frictionless.  Starbucks has long partnered with Apple by giving away free music and apps, but they also moved this functionality to the app.  By doing this, Starbucks has been able to engage their customers with their application outside of the brick and mortar stores.  I consistently look at my badges from Starbucks to see what free apps or music they are giving away this week.  Most of the time I don't get the freebies because they are not to my liking, but every once in awhile I do.  But it also has trained me to constantly go to the app.  I check my points and how far away I am for a free award and I am not even a big free award kind of a guy.

Starbucks has also made a frictionless payment process that also tracks my behavior.  I always received gift cards from Starbucks and had them strewn all over the place.  Some made it to the wallet, some were in drawers, but they were never consolidated.  Starbucks also had a loyalty program that was tied into a gift card, but it was confusing on how to interact with the program when I wasn't using that particular gift card.  Plus having to manually add money to the specific gift card was far from frictionless.  So I never really used the loyalty program and I was going to Starbucks less.  The app has removed all of this friction.  It is easy to transfer gift card money to the main loyalty account, which was a main pain point for me.  It also allowed for easy addition of funds into the card through the app.  These two items made using the program much easier.  

The other app that I have been very impressed with is the Chipotle app.  This app is a little different from the Starbucks app because it is just solving one problem, waiting in line.  The app allows you to place a Chipotle order and skip the line to pick it up at a designated time.  Now I don't know if any of you have been in a Chipotle and have to wait in the line to order, but it could be a fifteen minute exercise in browsing Twitter.  The app saves your favorites and recents so it takes approximately 20 seconds to place an order.  Pay online, just walk to the cashier and they hand you your bag of goodness and you are off.  Simple, frictionless and awesome.   

Improvements can be made in both of these apps to include more of the 4 qualities.  The Starbucks app nails 3 out of the 4, but can do a better job at using the app as a personal, targeted channel.  Right now the offers they have are not very tailored to my experience.  This is a big opportunity to make the app even more engaging.  For Chipotle, they only possess 1 out of the 4.  They might be monitoring my transactions, but they don't have a loyalty program tied to the app, so I am not sure.  The app is a great start, but they could hit a home run with the addition of some functionality.  Either way, I will still use it weekly to avoid the lines.

Using Smartphones and Apps to Enhance Loyalty Programs - NYTimes.com

I am such a big fan of using rewards on a smartphone.  There is no better way to communicate with a customer than with the device they are carrying around in their pocket.  The next evolution for rewards programs is moving from a card in the hand or a punch card mentality to devices that allow even smaller businesses to compete against bigger competitors.  

Smartphones and loyalty apps have begun offering small businesses enhanced program features and automated administration capabilities once affordable only to large companies like airlines and hotel chains. These capabilities also offer the equivalent of a real-world psychology lab for easily evaluating the effects of offerings and incentives on customer loyalty.

The key to any reward program is to capture data about a customers behavior.  If your program isn't allowing you to capture transactional level data in conjunction with the program, there may be a need to consider this approach.  If only to capture the amount spend and the date, this will allow a lot more opportunity for the business.  As I wrote in The True Purpose of a Loyalty Rewards Program, it is imperative to have a program that incentivizes a customer to share their data with you, but not over-incentivize.  The key is to drive behavior by targeting the customer, rather than giving everyone the same rewards.

“Clearly, this is the best of times for loyalty programs,” said Mr. Bolden of the Boston Consulting Group, who recommended that small businesses “focus on the non-earn-and-burn aspects of the program.” He suggested that spas consider a separate waiting room for their app-identified best customers.

“Or when the treatment is over, you hand the customer a glass of Champagne and strawberries,” he added. “If you’re an apparel retailer and you get in a new line from a new designer, invite the top 5 percent of your customers in first so they can see it before anyone else.” The point is that many effective rewards need not cost much to bestow.

Driving behavior is not all about a discount.  Understanding what your customers want and delivering them an experience is more important than a discount.  Because a customer that is coming just for a discount is more than likely not your most loyal customer.

“With apps you now can target specific customers and influence specific behaviors and keep track of all the results and understand the results,” Mr. Smylie said. “Because the check-level detail is now tied to a customer’s profile, we can understand what their purchasing behavior is, what their interests are and cross-reference that against their social media profiles and market to them more effectively and involve them at a deeper level with our brand.”

 

Busy is not a Strategy

One of my favorite people once taught me the mantra of "Busy is not a Strategy".  So many businesses use the wrong metrics or KPI’s when measuring success of the business.  For brick and mortar companies, their eyeballs tend to deceive them and they use that as their main metric (we were so busy).  For other industries it is market share.  How many widgets can we sell.  The problem can be using the wrong KPI’s along with having the wrong culture can lead to an unprofitable business.

I have implemented the “Busy is not a Strategy” with resounding success before.  We had a casino/hotel in a declining market that had 1,800 rooms.  They were moderately successful considering their location, but they were using the wrong metrics.  Their KPI’s were hotel occupancy and casino revenues.  Now anyone who knows the casino/hotel business is going to ask, what is wrong with those metrics?  They had good casino revenues for the market and an occupancy of 87%.  Most anyone would love these numbers.  Plus, they were really busy.

When we took over the business strategy of the property we saw to get these impressive numbers, there were a lot of giveaways and very low hotel room rates.  To drive the wrong metrics, they were servicing a large number of unprofitable guests.  The belief was if the hotel is full, more profits would eventually flow to the bottomline.  There was just one problem, the other centers of business were not large profit centers and the customers coming in at very low hotel rates did not gamble, because they didn’t have a lot of money.  

To increase profits, we decided we were not going to busy, we would focus our attention on the best customers and try to drive more frequency from these guests while sacrificing the low-end of the business.  This resulted in decreased occupancy and decreased casino revenues.  Uh oh.  Hotel occupancy went down to 44% and casino revenues were down 10%.  The operators were crying “the business is being ruined”.  Even competitors were coming over and asking the operators “are you going to be able to remain open until the end of the year”.  There was pure panic.  That was until the financials came out.  EBITDA was up 100% for the quarter.

By focusing on the best and most profitable customers, this property saw increases where it mattered most, the bottomline.  How did this happen?  The expenses to drive the KPI’s that were important to this property were astronomical.  They were essentially competing for market share instead of profit.  What happened through time, is the best customers started to come more often as that was the new focus of the property.  Casino revenues started to increase through time to levels much higher than before the strategy change, however occupancy remained at 44%.  They did this by focusing on:

• Increase frequency of their top tier from the players club
• Increase hotel room rate
• Target giveaways to the more profitable sector of the database
• Increase customer satisfaction of the best customers

This is very similar to what I see is happening in the phone industry.  There are many manufacturers and most of them are focusing on “Busy” as a strategy.  Now the metrics for busy in this industry are phones sold and market share.  Android accounts for approximately 80% of the worldwide market share for phones sold.  Yet when it comes to profit, that metric is almost reversed.  In fact it is a lot less than 20% in the last quarter.  So how can this be?

The phone manufacturers are selling basically the same thing.  They run Android software that they manipulate in small ways, but all the apps are compatible with their competitors.  This creates an experience that cannot be differentiated in any way but price.  This is the same thing that happened in the PC industry.  All manufacturers ran the same operating system, Windows, and they had to compete on price which forced them to make deals of adding bloatware onto their machines that destroyed the customer experience.  This is where the phone industry is heading.  When price is the main differentiator, businesses eventually will go out of business unless they can outlast the competition.  

So these OEM’s sell many millions of phones to increase market share which leads to…  To what?  I don’t know.  From what I have read these manufacturers have a decent amount of customers that are buying new phones, but they are buying them for the price.  So the manufacturer sold an unprofitable phone so they can gain a customer who will buy another unprofitable phone.  That doesn't sound like a sustainable strategy.  There is nothing that differentiates the experience of the customer enough to make that return customer more profitable.  It is a vicious cycle.  

The only company that is running a different strategy is Apple.  Apple is making almost all of the profit in the phone industry by having a differentiated product that is customer focused.  Apple is doing the same thing in the PC industry, their Macs account for about 10% of the market, but more than 50% of the profits.  Apple has been able to run the “Busy is not a Strategy” strategy to ultimate success.  Sure Apple sells a lot of phones and they would like to sell more, but these sales are the outcome of their strategy, not the focus.  Apple has a culture that is design focused which leads to a product that has a better customer experience.  

Apple is dominating the phone industry because they do not bow down to the marketshare gods.  They focus on the customer first through their design culture.  They make profitable, differentiated products which bring in the majority of the profits in the industry, which then allows them to spend more money on R&D to create more products and services to keep their customers in the ecosystem.  These customers buy new phones at a nice profit which creates a beautiful cycle.  All because Apple is NOT implementing “Busy as a Strategy” 

Graphic: Android's split personality, 2014 edition

Interesting and true take.  Without that fragmentation, Android would never have the market share it currently has, however that fragmentation makes it very difficult for developers and smartphone manufacturers to thrive in the ecosystem.  

This is exactly what happened in the Windows vs MacOS past.  At the beginning of the "war" the Windows environment had a plethora of people making money.  Developers were making a fortune in software and manufacturers were making very good money in making computers.  Of course Microsoft was making the most money out of all of them.  

However, over time there becomes a race to the bottom.  In the Windows example the developers never felt the hurt as much as the manufacturers because Windows owned the enterprise.  The manufacturers however hardly make any profit.  

The interesting thing to watch in the Android vs iOS "war" will be the long term game.  The smartphone wars are very young and already all the manufacturers have gone straight to the bottom.  Since this "war" doesn't have high-end enterprise dominance, developers are not making more money on the marketshare winner, they are making more money on the profitshare winner.  

So even though the marketshare won the day in the previous "war", we are not seeing the same behavior in this war, so over time I believe the fragmentation will hurt Android.  That's why Google is going with the Android L philosophy moving forward, which I think is a necessity for long-term survival.  

Long Term Strategies vs. Short Term Market Share

Android users are not as active and engaged with online activities as iOS users are. And when companies from start-ups to established players decide which platforms to target with their apps, their web services, and their marketing campaigns, they’re going to go where the eyeballs are. If you follow where the money should be going, it should be focused on Apple.

Which creates a virtuous circle of engagement. People develop their tools for iOS because iOS users are more engaged and easier to monetise.

There is definitely a difference between Android and iOS users.  This brings up interesting points when talking about different business strategies.  When having products, engagement and return loyalty are things that create a sustainable business.  Samsung is selling a plethora of products and in volume, however if the customers are not engaging in the platform and are purchasing items through the Google Play store, Samsung has nothing to hold onto customers when their contracts come up.

This is similar to what we saw with the PC industry.  Because the platform was owned by Microsoft and all the programs and files could easily be switched from machine to machine, the manufacturers had nothing to compete with.  So when there is no differentiation, businesses compete on price and volume.  When that happens everyone loses except the consumer.  However, the consumers gain is only short lived because the products they are buying are becoming cheaper and cheaper and over time they last a lot shorter than the products they purchased before.  

I believe this is what we will see pan out in the cell phone space outside of the US.  Also, you have already seen this in the tablet space.  Because no one can compete with the iPad on a product and experience level, the market has already taken a nose-dive in pricing to gain market share.  The problem with this is the experience delivered to the customer.  These companies are taking a short term gain and will be losing these customers when they are ready to buy again because their experience is subpar.  

This will be fun to watch.  Hopefully we will see much more innovation in the years to come, instead of just relying on Android as a competing platform and everyone racing to the bottom on price.