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April 2018

How Zara is setting new marketing standards with retail customers

With all the changes flying around the brick-and-mortar channel of retail commerce, it can be very difficult to organize what we're learning and figure out how to apply it. A professor at the Fashion Institute of Technology, Shelley Kohan, offers an excellent way to organize a strategy, based on her study of Zara. And consultant Pamela Danziger paints a great picture of how it plays out on the store floor. 

The 4 E's describe how Zara has put the customer in charge... For a company to do that, it has to be organized to learn from the customer and keep up with them in its operations. Are you interested in more loyal retail customers? Then consider:

Forbes contributor: Why Zara Succeeds, 2018-Apr-23 by Pamela N. Danziger

Creating customer curiosity is a most powerful pull marketing strategy. Every human being is innately programmed to satisfy it. With this new AR application and in so many other ways, Zara excels by pulling customers into the brand, unlike its closest competitor H&M, which remains fixed on pushing its brand and product out to the customer.

In studying these two oft-compared brands, the essential differences revolve around their overall approach to marketing. H&M still is fixed on the old 4Ps of marketing model—Product, Price, Promotion and Place—where the company and the brand is the focus.

By contrast Zara has evolved to the new 4Es of marketing strategy—Experience replaces Product; Exchange is new Price; Evangelism is now Promotion; and Every Place is new Place—that puts the customer at the center around which the company and brand revolve.... 

Shelley E. Kohan, assistant professor Fashion Institute of Technology, recently shared an analysis of the Zara difference based upon the 4Es marketing concept.... 

Zara has a deep understanding of the entire value proposition it exchanges with the customers. Its fast-fashion deliverable is available in the quantity, format and time in which the customer needs the product. That translates into great value.

In planning a loyalty program, we need to keep our eye on the "exchange" of value. Most customers join a loyalty program because they do plan to spend with a retailer, and the program will help them maximize the value they realize in that exchange. 

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Marriott innovates at Coachella, lets loyalty members bid on yurts

This Marriott promotion is so much fun. It makes it such a privilege to be a member of their loyalty program. 

Adweek: Why Marriott Continues to Bet Big on These Incredible Pop-Up Hotel Rooms at Coachella, 2018-Apr-12 by Katie Richards

Marriott is offering guests a chance to stay in yurts, a circular tent, decked out with all the essential music festival necessities including Wi-Fi, a private restroom and shower, a stocked minifridge and 24-hour security....

“Everything we are seeing now is all about the experiences,” said Ed Horne, evp of Endeavor Global Marketing, which partnered with Marriott on its 2017 activation at Coachella as well as the latest effort. “It is all about elevating the experience and sharing that out socially and digitally with your friends and followers.”

Instead of paying with real money for the yurts, Marriott opened a bidding platform on SPG Moments on Starwood’s website—Marriott acquired Starwood Hotels & Resorts in September 2016—and let members bid for the rooms using their accumulated loyalty points. The yurts went for as many as 822,500 points. 

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The Starbucks approach being adapted by loyalty startup MunchMoney

When we first heard about MunchMoney innovating restaurant loyalty, we thought hmmm... maybe we'll wait and see if this succeeds before we talk about it.  Then we saw an article about an investment analyst who downgraded Starbucks stock because they had lagging loyalty-card signups. 

Loyalty programs can drive both profits and revenue growth, especially by improving share of wallet--the amount that existing customers are spending. It's unusual to see them slammed so hard for not driving new customer growth, but we have an interesting situation here. Because the Starbucks loyalty card must be preloaded with funds (like a gift card), analysts are extrapolating revenue growth from new signups. Low signups become a leading indicator of lower future revenue. Hmm... again.*

BUT... we are not about investing—we are about designing loyalty programs, and the most important feature of MunchMoney is that, like the Starbucks program, it requires users to preload the card. However, there are major differences. 

InnovateLI: Ready to Roll, MunchMoney Already Tastes the Big Time, 2018-Mar-29 by Gregory Zeller

One day, the munchies struck again and Kane was rummaging his wallet to fund a Chipotle run – and suddenly the final piece of this creative puzzle fell into place, in the form of a nostalgic memory. The James Madison graduate found himself longing for his old college meal plan, that no-fuss, no-muss prepaid account that eschewed cash and ensured his plate was always filled with his personal dining hall favorites.

Entrepreneurial instincts twitching, Kane dove deep into Quick Serve Restaurant industry customer-loyalty programs and learned most failed to significantly drive up business. Save one: The loyalty program sponsored by ubiquitous coffee chain Starbucks is “massively successful,” according to Kane, who notes one key difference in the coffee king’s model. Starbucks works on a pre-payment model (like a phone card), wherein customers load up their accounts with cash first, then enjoy the cumulative benefits of loyalty. “So now they’re capturing this massive upfront cashflow, which is a huge advantage to them,” Kane noted. “They’re sitting on a billion dollars in cash because of their loyalty app.”

... Kane and friends officially launched West Islip-based MunchMoney Inc. in January 2017. Its mission: to become “the college meal plan for real life,” according to the CEO, while “reinventing how people interact with fast-casual restaurants.”... Debuting [in May 2018] on both Android and iOS devices, the app will allow users to deposit funds directly into accounts at participating restaurants – already a step beyond the typical loyalty program (and closer to that Starbucks model), Kane noted, with the user “paying up front and giving up the choice of spending that money somewhere else.” [Emphasis added.] ... 

MunchMoney will also guarantee a 10 percent discount on the total bill every time a customer pays through the app, while giving its member restaurants the opportunity to tack on additional incentives.

The app launches with two Hauppauge restaurants aboard, The Sexy Salad and Build a Burger, whom Kane framed as brave first adopters, willing to roll where other restaurateurs fear to tread.

*We've actually heard about another way investors may use loyalty data: Japan's Loyalty Cards Provide a Sneak Peek at Company Profits, from Bloomberg, January 2018. 

More details about the Starbucks situation. 

PYMNTS.com: Retail Analysts Whack Starbucks Over Flatlined Consumer Loyalty, 2018-Apr-16

Concerns over customer loyalty — as well as increasing competition in the craft coffee market — have caused one Wall Street analyst to cut his price target on Starbucks. In fact, Cowen analyst Andrew Charles said both factors are likely to hinder Starbucks sales over the next two years, according to CNBC. As a result, he downgraded the coffee company to market perform from outperform. The analyst also cut his price target on shares of Starbucks to $65 from $68, implying 9 percent upside over the next 12 months. Starbucks did not immediately respond to comment, but its shares fell 0.3 percent on Friday.

One of the biggest concerns for the coffee retailer is customer loyalty. Starbucks experienced an unusually light period of gift card activations during last year’s holiday season, which will have an impact on the success of loyalty efforts for 2018.

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Content designed to drive loyalty at Marriott

Branded content thrives on customer curiosity. I think that's an amazing insight!

Campaign (Asia edition): Brands needs to make loyalty, not content for content's sake: Marriott marketer, 2018-Mar-28, Interview of Tony Chow, APAC director of creative and content marketing for Marriott International, by Soon Chen Kang

Citing American Express as an example of a brand using content marketing effectively, Chow said that content is not a short-term game. “You can’t expect it to be an instant, overnight success," he said. "Content marketing needs a long-term investment. Building trust and loyalty is a relationship, just like falling in love, going through the whole courtship before getting married."

Having a content studio and being its own publisher is one way for Marriott to grow its audience organically, Chow told Campaign Asia-Pacific after his on-stage appearance. Having said that, he agreed that paid media provides a good balance in driving awareness and audience to the brand’s distribution channel. “We want to focus on our own platform to engage more with our consumers, tell them about our new developments," he said. "A part of the process about getting loyalty is building a community."

In terms of content that audiences will find engaging, Chow said storytelling thrives on curiosity, and the hospitality brand did not have to look further than using its own staff as cast. “The best way to tell stories is to leverage on authenticity," he said. "Real stories are more powerful. We want to utilitize people that we don’t see all the time—the bartenders, the chefs. That will build a connection with the audience based on what they experience when staying at a hotel.”

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