How Amazon is priming the pump at Whole Foods: get ready for a gush of new loyalty tactics

When growth stalled at Whole Foods, investors demanded management changes, but CEO John Mackey's job was saved by Amazon purchasing the company. To get growth flowing again, Amazon will prime the pump initially with lower prices at Whole Foods, then try to pump members of its loyalty program, Amazon Prime, into the store. In a press release, Amazon stated, "... Amazon Prime will become Whole Foods Market’s customer rewards program, providing Prime members with special savings and other in-store benefits." 

So there's good news for loyal Whole Food customers (lower prices), and good news for loyal Amazon customers (rewards extended into Whole Foods). So, what does this mean for the grocery industry and its loyalty programs?

In one word: pressure. Kroger has been a major innovator in retail loyalty programs, and now they will have to match wits with one of the world's most aggressive companies. Walmart has generally avoided loyalty programs and may be driven to deeper price competition. Everybody else will probably be forced to change quickly as loyalty shifts. 

Advertising Age: Amazon 'Primes' Whole Foods for More Visitors, 2017-Aug-25 by Bloomberg News

"Prime customers are very suggestable and leadable, extremely loyal and spend a lot more at Amazon than others," Levin says. About 63% of Amazon customers in the U.S. have Prime and they spend $1,300 a year on goods from the retailer, compared with $700 for non-members, CIRP estimates. They purchase from Amazon 25 times a year on average, 11 more visits than non-Prime customers. The company won't say how many Prime members it has, although CIRP put that number at 85 million in the U.S. as of June 2017, about a quarter of the country's population....

About 60% of Whole Foods shoppers are already Prime members, CIRP estimates. This still leaves millions of new members to lure through those new in-store deals and the loyalty program.

..."It's an opportunity for Whole Foods to capture more wallet share of its best customers, provided the program has the right components and you really get rewarded for shopping at or visiting Whole Foods," says Sucharita Mulpuru, a retail industry analyst. Amazon's new physical bookstores have Prime tightly integrated into store transactions and they have a distinct pricing structure for Prime customers, she notes.

"It doesn't even make sense to purchase in an Amazon bookstore unless you have Prime," Mulpuru adds. "I doubt they'll be quite that drastic with Whole Foods but I do think they'll incentivize shoppers quite a bit to associate their Prime account with their Whole Foods transaction."


Wise up to Verizon Up

Verizon Smart Rewards was a disappointing program from the beginning, and in reaction to customer feedback, Verizon is launching a new program called Verizon Up. 

When the Smart Rewards program was launched we noted that Verizon's chief technology officer was actually quoted as saying Verizon's goal was to accumulate lots of behavioral data about their customers. So the goal was not so much customer retention as customer exploitation??

The new program, Verizon Up, speaks to customer preference for simplicity as well as experiential awards such as concerts and music. However, it restricts the customer tightly in three areas... 

  • In order to participate, we have to be the Verizon user who pays the bill. Other members of a family plan are not able to participate. 
  • The only way to sign up is to place the Verizon app on your mobile phone. 
  • The reason for having to sign up through the app is that you also have to sign up for the Verizon Selects 'share ALL my mobile, apps and browser usage data with Verizon and anyone it deems a partner' program. 

Verizon says you can opt out of Verizon Selects later, but we're sure most people will never think to do so. 

As Verizon is listening closely to customer feedback, I suspect that family members will be picked up eventually, although not at the same level of rewards.

Verizon Up is based primarily on the amount you spend with Verizon Wireless. Reward credits are issued for each $300 spent and would appear to expire in 60 days. That would make participation in the program challenging for us because we work hard to keep our monthly bill down below $300 a month. 

So there's one final remark that I'd like to make as a Verizon customer. The basic customer experience with Verizon is quite good. They've provided many unexpected benefits over the years to keep us loyal. We are not planning to switch, but we won't be participating in this rewards program (which isn't being marketed as a loyalty program, thank goodness). 

Android Police: Verizon Up is the carrier's new rewards program, replaces Smart Rewards, 2017-Aug-1 by Ryne Hager

Part of this new rewards program feels like a knee-jerk response to the marketing success of T-Mobile Tuesdays, but I am not sure that it offers quite the same value. Just last year T-Mobile handed out free stock in the company to its customers. As of now, that's a $60 value that might have even exceeded one's total monthly bill with T-Mobile. A $5 Starbucks gift card for $300 spent isn't quite the same sort of value.

The Verge: Verizon’s new rewards program lets it track your browsing history, 2017-Aug-2 by Chaim Gartenberg

But, as noted by Brandon Robbins on Twitter, the new program comes with a pretty big catch: you have to enroll in Verizon Selects, a program that allows the company to track a huge chunk of your personal data. That includes web browsing, app usage, device location, service usage, demographic info, postal or email address, and your interests. Furthermore, that data gets shared with Verizon’s newly formed Oath combination (aka AOL and Yahoo), plus with “vendors and partners” who work with Verizon. Which is kind of a long list of people who have access to what feels like a fairly significant amount of your data.

Fortune: Lady Gaga Partners With Verizon For Ticket Giveaway, 2017-Aug-7 by Aaron Pressman

Verizon Up... seeks to simplify giving benefits to participants and focus the very best offers on Verizon's best customers. At the [Lady GaGa] shows, Verizon customers will even have their own special seating section. Only a limited number of tickets will be given away, and participants will have to compete against each other for them at designated times in the rewards app. Other rewards will include tickets to NFL games and other major events, as well as lesser items such as several free months of Apple's Apple Music or HBO Now, or 20% off a return flight on JetBlue. Starbucks and Panera Bread are also partners.

Verizon Press Release:

“We spent a lot of time speaking to customers who were telling us they were frustrated with existing reward programs on the market,” said Diego Scotti, Chief Marketing Officer, Verizon. “They didn’t want to spend time tracking or accumulating thousands of points in exchange for trivial items. They wanted rewards that have real value and were rooted in experiences,” said Scotti. “That’s how Verizon Up came to life, it’s digital only, simple to use, rewards are constant and relevant, and it connects you with brands and access to experiences you know and love.”

Fortune: Lady Gaga Partners With Verizon For Ticket Giveaway, 2017-Aug-7 by Aaron Pressman

But Scotti says customers will be able to opt out of tracking. "For us, privacy is really, really important," Scotti says. Customers will have "choice and control," he says, and will be able to decide not to allow Verizon to collect their personal tracking data. "If you sign up to the Up program and then you say 'you know what, I don't actually feel very comfortable with you having this data' you can actually opt out and still be in the program."

From the Verizon customer site (log in required): 

Verizon Selects helps personalize your experiences and make advertising you see more useful across the devices and services you use. To do this, the program uses information about your web browsing, app usage, device location, use of Verizon services and other information about you (such as your postal/email addresses, demographics, and interests) and shares information with Oath (formed by the combination of AOL and Yahoo). Verizon Selects also helps personalize the rewards you see in Up.

Verizon protects your information and does not share information that identifies you personally outside of Verizon other than with vendors and partners who work for us.

Participation in Verizon Selects is required to enroll in Up. You can update your Selects privacy choices at any time at vzw.com/VerizonSelects

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Walgreens builds loyalty by improving customer experience

The Walgreens "Balance Rewards" program is now 5 years old but stays on the leading edge of technology, creating innovative customer experiences such as "refill by scan" for the smartphone. They are doing an exceptional job of merging digital and in-store shopping, with over half their app users enjoying the app while in the store. In either the app or on the web site, customers can use "Pharmacy Chat" to maintain their relationship with their pharmacist. They also encourage employees to become users of the technology, getting faster and more sophisticated feedback on new features. 

"Balance Rewards" has 150 million registered members, of whom 85 million are active. That huge base makes it easier for them to perform testing by releasing features in stages. 

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How UGG is delivering an experience of gratitude in their loyalty program

Many of the least effective loyalty programs feel like a whip the brand is applying to get customers to buy more. The Great Loyalty Reset Report from 500 Friends/Merkle contains many fresh insights, but I find this insight about conveying a customer experience of 'gratitude' is the most compelling. How do we show our customers continuous gratitude? 

Loyalty 360: Most Consumers Focus Loyalty Program Attention on Five Retail Brands, 2017-Jul-6 by Jim Tierney interview of Sara Hogan, director, growth marketing, for Merkle Loyalty Solutions Group

Why is there such a disconnect between loyalty program managers and consumers?
Hogan: Fundamentally, I believe that brands see loyalty programs as a revenue generator and consumers see loyalty as a way for a brand to thank them for their business. This creates a significant disconnect. While the program manager has more consumer data available than ever before, meeting consumer expectations is becoming an increasing challenge.

From The Great Loyalty Reset 2017 report: 

Engaging with your customers is difficult if you don’t know who they are. Connecting with customers is incrementally more challenging if their purchases and brand interactions tend to occur only at limited times of the year.

At 400,000+ members strong, the UGG Rewards program is successfully addressing both challenges – and simultaneously positioning the iconic boot/fashion brand for a market increasingly influenced by younger consumers, social influence, online recommendations and built-in, seamless loyalty.... 

Today, the program not only enables and simplifies data collection, it rewards consumers for providing it. At sign-up, the rewards program now captures basic data about customers – name, age, location, mobile number, email and optional information, such as birth date.... They earn points when they sign up, link social media accounts, post on Twitter or Pinterest, create or share a wish list, or post an online review, for example. 

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Penney's new loyalty program shows the pressure of shopping behavior

While we would appreciate having the loyalty of our customers without paying attention to the competition, we have to admit our customers almost always know what our competition is doing. A study recently published by McKinsey & Company makes it clear: in women's clothing, 82% of purchases are shopping driven, not loyalty driven. Read more about shopping behavior in many categories. 

Dallas News: J.C. Penney tries to capture the best of Kohl's in new loyalty program, 2017-Jul-10  by Maria Halkias

The department store chain studied the hospitality and travel industries and its retail peers, while asking customers to rank features that were most important to them, said Sherina Smith, vice president of loyalty and customer relationship management.

"Customers didn't like having a limit on how many $10 rewards they can earn or that points expired," Smith said. "That's not a way to drive loyalty." Penney lifted a cap on the number of $10 rewards shoppers can earn in a month. Those rewards are good for 60 days. Members-only prices and shopping events have been added where shoppers can earn rewards faster.

Penney's rewards customers shop and spend more than twice as much as the retailer's other customers, and 66 percent of Penney's sales comes from rewards customers, Smith said. The goal also is to increase the number of Penney credit card holders, she said, which is now about 40 percent of its customers. In the new program, Penney credit card purchases earn twice the points of other types of payments. 

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Starbucks gifts cards keep on giving (to Starbucks)

If I liked Starbucks coffee, I'd have more success in using the stack of $5 Thank You gift cards I've received from companies. As it is, I'm just supporting Starbucks' bottom line unconsciously by letting them stack up. 

Independent retailers tend to resist the investment of turning branded gift cards into a loyalty program, but we need to do a better job of understanding the long-term financial benefits. 

The Motley Fool: These 3 Companies Earned $99 Million From Unused Gift Cards Last Year, 2017-Jul-15 by Jordan Wathen

Because credit card fees typically include a fixed-fee component that does not increase with the size of the transaction, Starbucks prefers its customers buy multi-use gift cards rather than making several smaller purchases with a credit card. For this reason, gift cards are an integral part of Starbucks' loyalty program. What it saves in processing fees can be used to incentivize repeat visits, a win-win for the world's largest coffee chain.

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Informal loyalty works at Four Seasons

A loyalty program can help obtain valuable information about your customers, but it's certainly not the only way. At Four Seasons, they have decided a rewards-oriented system is at odds with their culture, and since they pride themselves on recognizing their customers and remembering their preferences, I doubt they have suffered from the decision. If you plan to go forward without a loyalty program, you still have to educate your staff and provide an information system that helps them keep track of customer preferences. 

Skift: Why not having a formal travel loyalty program works--for some, 2017-Jul-10 by Deanna Ting

In the case of Four Seasons, Leff said that the lack of a formal rewards program doesn’t mean there’s no comprehensive customer relationship management strategy in place.

Four Seasons Hotels & Resorts President and CEO J. Allen Smith told Skift last year, when asked about the company’s loyalty strategy: “… Loyalty programs are defined by ‘I accumulate points and then I get something of value for that that I can redeem.’ Truthfully, that’s not what our customers are looking for. Our customer is looking for recognition: ‘Know who I am, and provide personalized services to me.'”

He added: “For our best customers, we know who they are and in many cases, we have, in effect, affiliated them with someone within Four Seasons that will facilitate their reservations in other properties, movement around the world, whatever the case may be. As they go from property to property, people will know who they are.”

The catch, however, is that if a company chooses not to have a formal loyalty program, it can be more challenging to collect customer data needed to personalize that guest or passenger experience. And having a formal loyalty program is not only low-cost but also often more effective in terms of gathering that data.

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Earned versus coercive loyalty

When we accept someone's authority over us, we know instinctively they expect us to be loyal. This type of loyalty becomes coercive if we expect punishment for being disloyal. Loyalty based on fear toward someone who has power over us probably needs a different name. 

Vox: The problem with Trump's idea of loyalty, explained by psychologists, 2017-Jun-8 by Julia Belluz and Brian Resnick

David DeSteno, a psychology professor as Northeastern, explained that there are a couple of methods people can use to build loyalty and trust.

One is, you meet someone, work with them, and learn about whether they’re going to have integrity and cooperate with you, DeSteno said. “Trust is a bet that a person is going to hold up his end of the bargain — accept some short-term cost for longer-term gain.”

Psychological studies show this pattern often holds in human relationships. We grant power to those who are empathetic, and those who look out for the greater good. A more Machiavellian approach works, too, but it can be off-putting. “People intuitively recoil against people who look as though they will exploit others, the social collective, and undermine the greater good,” Dacher Keltner, a UC Berkley psychologist who studies power, says. “I see Comey's actions as in part guided by this intuitive tendency.“

The other way to build trust is less effective: You demand or ask for it, as Trump does. This normally doesn’t work, except for in relationships with a power differential.

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Learn the competitive advantage of great CRM habits

In a recent issue of INC. magazine, Nicholas McGill gave a wonderful summary of great CRM habits. Even if you are a high-powered salesperson at a big company, you have to be maintaining your personal contact network, and these tips show the way. I have re-framed his points in my own language because I totally agree and I want to have them seared into my own brain. 

INC.: Managing Connections Is Now an Essential Life Skill. Step Up Your Hustle With These 7 Tips, 2017-May-16 by Nicholas McGill 

It may shock you that the linchpin to having more influential relationships rests not in some secret funnel app or technology but, rather, a deeper commitment to some basic fundamentals of contact management. These relationships are your opportunity farm. Maximizing your results often comes down to simply being a better steward than the rest of the crowd. So let's get to work. 

So here is my recap of Nicholas' wisdom:...   CRM to Save Your Life

  1. Get a good tool... Not Outlook or Gmail or Apple Contacts... because noting the activities is just as important as recording contact data. 
    1. You can keep it simple, like Streak for Gmail or Less Annoying CRM or Insightly... 
    2. Baseline: you must to be able to schedule a 'next task' every time you touch a contact, with a due date. 

  2. When collecting information, getting the name, and email or phone is NOT enough (and less is disastrous). If you can't get employer, title, interests or more, then at least write down where/when/why you met the person. 

  3. Prefer the personal email address and mobile phone if you can collect it. Business information is changing faster than ever. 

  4. Capture the story. Having a name with no context means making a 'cold call' later. 

  5. Watch for noteworthy tidbits. These will reawaken the spark. Better write them down ASAP because they fade SO fast. 

  6. Social media accounts rise and fall. When you first connect with someone on a social platform like LinkedIn or Facebook, you can probably collect their email address (which is probably a personal one), right after the connection is established. This will be crucial when their account lapses two years later. 

  7. Each time you meet the person IRL (in real life), update their record with details and personal anecdotes. Even if you don't reconnect for years, those memories will reawaken the connection. 

More from Nicholas McGill:

Every meeting reveals something new about the needs, interests and desires of one of your contacts. If a meeting doesn't, you are talking too much and asking too few questions. You should review and reflect on your meetings by jotting a few notes in your CRM.... 

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CRM as an innovation driver at Wyndham Hotels

Customer relationship management is not just about 'sales and service.' Great CRM programs drive innovation. 

Loyalty360: Deep Customer Research Pivotal Piece of Customer Loyalty Puzzle at Wyndham Rewards, 2017-May-11 by Jim Tierney

During a session titled, “Loyalty Revisited – A Retrospective Panel Discussion with Loyalty Expo “Alumni” at the recent Loyalty Expo, Noah Brodsky, senior vice president, worldwide loyalty and engagement at Wyndham Hotel Group, talked about the key factors that fuel the successful Wyndham Rewards loyalty program.

“There is more heated competition for the same customers,” Brodsky said. “We will see richer rewards. We rolled out new benefits for our best customers. It starts and ends with deep customer research...."

Customer research showed that a free night was the most important reward for members and, yet, that same research overwhelmingly showed that most felt that reward was out of reach.

With the new program, Wyndham introduced a flat redemption rate of just 15,000 points per night at any of its more than 8,000 hotels and, simultaneously, made it so that members earned a minimum 1,000 points with every stay.

Last month, Brodsky said that Wyndham views itself as a challenger brand and continues to push for innovation.

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