Saturday, December 29, 2012

Tale of Missed Opportunities - Are Loyalty Programs Serving the Purpose?


I fly a lot on the domestic circuit. I fly on airlines which have the frequent flyer programs and also on those which do not have. Since I also fly on value airlines like Indigo, Spice, Go Air etc., simply because of the convenience of timing, I was moved down a tier on Jet Airways as I did not fly on it that often. There were also instances wherein I flew a cheaper airline at the same time as the difference between the fares of Jet and the others was huge.
The moot point is I lost a tier and I lost it for some reasons. However Jet or for that matter any other airline is not bothered about it. - Maybe, I as a customer flew other airlines (which were the case); maybe I found the fares on other airlines cheaper - which were the case sometimes. There could be many reasons why I did not travel that often on Jet.
Just a few months back I was a member of the highest level/ tier on Kingfisher. This certified to other airlines that I travel a lot, but they tended to ignore the fact even though I had a baggage tag which showed my membership status.
As a marketing person I always wondered if other airlines chose to ignore that I am a frequent flyer and could make business sense for them or are they not bothered. And what is even more perplexing to me is why the ignorance?
As typical business people we look at Life Time Value (LTV) of the customer but somehow this seems to be ignored.
While I have used the frequent flyer programs as an example, some of the departmental stores are equally guilty of the same missed opportunities.

  • Complaint # 1

As I had mentioned before I was downgraded on Jet and all I got were a few mails informing that I would lose a tier. The mails did not really enthuse or tickle me to fly more. If they had delved deeper they would have seen that I seemed to be cutting down on my flights on Jet. If not a call at least a mail would have done. Throw in a small offer. And then maybe I would bite the bullet. Ah! Yes I did get a pack welcoming me to the lower tier.

  • Complaint # 2

After standing in the long regular queue for the general members, I reached the check in counter, not irritated that I stood in a long line but an enquiry as to why I have not been flying often when I gave my frequent flyer number would have helped.  Just imagine the wealth of information which would have been available to the marketing/ sales team.

  • Complaint # 3

In the flight, just imagine if the cabin crew welcomed me and asked me a few questions. The crew could have access to my FF number and it would be a great feeling if the crew member welcomed me back.

  • Complaint # 4

While the airlines do a fair job of treating high value customers differently, many retailers do not. I am a member of loyalty programs of practically all the chain stores in India, infact at one of them we shop every week. It is unfortunate that we are still treated the same way 4 years back, even though we are avid shoppers now. We buy our provisions, apparel, accessories etc., practically everything we need but.....

Frankly we do not care much above the loyalty program much less about the points. Infact there have been many instances wherein we do not even record the transactions. How about a separate line for bill check outs for the high spending regular customers? How about some special offers? 
High value customers like me can be treated differently in many ways - gifts, significant number of reward points. The point is that the high value customers are high value not only in terms of revenues but also from a loyalty standpoint. It is true that the cost of getting a new customer is far higher than retaining an old one.  Sometime these golden thoughts are so relevant!

  • Complaint # 5

I have a name and so do all others. Most of them like their own name. If the retail brand/ chain have my name why don't they use it? Why I am a nameless person? Incidentally the airlines companies in India do a fair job of this where I do get personalized mails, a greeting at the check in counter and so on.  
One of the easiest ways of establishing a personal connection between a brand and its customers is to get a little personal. When you acknowledge a person you are actually telling him or her that he/she is valued. In real life too would you liked to be called by a name or by somebody who calls you boy! 

  • Complaint # 6

Some programs have tiers which do not make any sense. They seem to be there merely to provide a psychological high. 
Some programs do have tiers, and treat customers differently once they hit a certain spending threshold. Others also have tiers but fail to provide any real differentiation once the threshold is hit.
For example Jet Airways has tiers Blue & Blue Plus but I simply have not figured out why there is an extra tier. The benefits once someone finally makes it are negligible.  No lounge access, no priority no priority check-in, nothing. While the program is successful, the absence to differentiate is galling to say the least.  People will see through pretentions and ultimately it is a big let-down for members (and I speak as one)
It  is a big let-down for those members expecting additional benefits, and as such, careful attention should be paid to how tiers are designed.

  • Complaint #7

Why is it that most loyalty programs are devoted to only increasing the customers spend size/ bill value. I cannot think of a program which drives more visits. If I were to visit a particular store/ stores many times, I am pretty sure that I would eventually spend more than what I would normally. Naturally it should be worth the while for me to visit an outlet multiple times in a particular time period.  
This comes from the thinking that the customer will only buy so much and the objective is to compete for the larger piece of the pie. The same loyalty program can also be used to create demand for products which otherwise would have not been bought. If only the Shell gas station near my office offered me a program which incentivised to me a come more often to fill up there. What’s more they could give me a good discount for picking up engine oil or even tires!

  • Complaint #8

In this day and age of real time information technology use data to get the insights- it has the ability to provide useful data about customers. The data can both produce insights about general buying behavior and allow the seller to target promotions to individual customers.
 At the rate we buy merchandise in Lifestyle/ Auchan, I am sure by the Inner Circle program would have a fair idea on our buying habits. It is perhaps sad that it has not been leveraged enough. Most programs in this country don’t seem to use analytics to the level it needs to be.

  • Complaint #9

When a loyalty program pledges to reward customers with special treatment it must ensure that the services provided are better than those available to regular customers. This is really galling when I see my luggage come out of the conveyor belt much after the regular customers have got theirs, even though my luggage has been appropriately tagged with the bright priority badge.

Let me be very clear, these are emotive responses but customers are irrational. Only some customers are logical. As a marketer I do understand some of the problems but I  am also a customer and I am also all of the above!

And sometimes you don’t realise what you are missing until it’s gone…


Friday, December 07, 2012

HP or Hewlett Packard - The Conundrum!



An $8.8 billion write-down of its latest acquisition - Autonomy seems to be the latest mishap in the HP saga. And with it comes proof that HP has been following a path which is heading south.
From the exciting times of Lewis Platt and John Young to the bleaker times started by Carly Fiorina, HP has lurched from disaster to disaster. And the list looks endless.
Fiorina decided to move to reorient the company to a marketer of computer equipment and enterprise systems. Her acquisition of Compaq Computer so that HP- Compaq would be the leader in low-cost personal computers was a disaster.  She tried to focus simultaneously on high-end enterprise systems. Luckily or unluckily she had bid for the business consulting practice of PricewaterhouseCoopers, but lost to IBM. 
NCR's Mark Hurd followed her and appeared to appeal to the stock market. The efficiency expert, he focused on short term sales growth and cost reduction, doubling the company’s earnings and stock price. His notable acquisition was Electronic Data Systems’ computer services capabilities which led to an $8 billion write-down in 2012. And given his short term focus, the company’s investment in R&D, fell to 2.3 percent from 4 percent.
In 2009 and 2010, HP acquired 3Com and Palm, the latter after an intense bidding war.
Hurd left primarily due to his entertainment of a certain person of the fairer sex on company expenses, the board hired Leo Apotheker, the failed co-chief executive of SAP. He proposed selling the company’s PC business and dropping its tablets and smartphones, to make HP a systems and software company (a la IBM). He acquired the British software maker Autonomy for $10 billion. 
Apothekar focused on what he knew rather than what was good for the company. As a matter of fact almost all CEOs Fiorina onwards, focused on what they knew.
Somewhere down the road in a string of unending disasters, Hewlett Packard became only HP.  That aptly summarized the fall of the company.

What HP Needs to Do
The founders Bill Hewlett and David Packard, developed a unique management style that came to be known as The HP Way. The tenets of the HP Way are as follows:
1. We have trust and respect for individuals.
2. We focus on a high level of achievement and contribution.
3. We conduct our business with uncompromising integrity.
4. We achieve our common objectives through teamwork.
5. We encourage flexibility and innovation.
It is very obvious that HP has deviated from the very tenets which were set. 

1. Go back to the roots - Innovate
The erstwhile  HP's bedrock has been innovation  for a company which or was once a great company. The answer lies in innovation and come up with products that have unique benefits. It seems apt to fall back on a by-line of HP which said 'Invent'.  To make the company great again, the need is to innovate, create new products/ categories.
Cost prudence and efficiency are processes which need to be followed as a rule and not as a differentiating strategy.

2. Spot the trends and recognize opportunities
The spirit of innovation creates opportunities across various markets. It gives a perspective to encourage and take risks. Somewhere in the cost cutting saga and cutting on R&D spends, risk taking decreases. This can be  seen in the missed opportunities too. 
Light emitting diodes - It was one of the early leaders in light-emitting diodes. Infact  Roland Haitz coined the industry-guiding Haitz’s Law while at HP. However the company did not think that there was a significant opportunity in the near future and the LED team was pushed into Agilent who in turn sold them off to Philips. Needless to say the lighting market is huge and LEDs are one of the main products to drive this.
Memristors -  HP announced in 2008 that they had designed a circuit with which one could make dense, long lasting memory chips. For decades other companies had been working on it with success eluding them. However, feeble efforts were made to take this forward and since then other companies have cracked the code to set standards.
It is very important that risks are taken especially if the innovation is unique. Agree that risks are higher but the company itself has proved that it is this risk taking ability which had created the HP of the glory days.

3. Split the company into Hewlett Packard and HP
Of the revenue of  $120 million, PCs and printers still account for roughly $ 60 billion in revenue and $5.3 billion in operating profit which is approximately half of the company’s revenue and 45% of the operating profit. 
In reality, HP is two diverse businesses - a personal computer and printer business which is highly commoditized and an enterprise focused systems, services and software business.
The former business with its wafer thin margins and high competitive pressure requires high efficiencies of logistics, distribution, and production along with quick product introductions catering to small micro-segments. The enterprise business requires high levels of customer engagement, customized solutions and sophisticated software.
Given that the requirements both internally and externally are very different, it makes sense to split the two.

d) Hire the right CEO
Over  the last decade, HP has hired stars - stars who worked in environments which was conducive to them. In a new environment like HP, these stars lurched from mistake to mistake. The CEOs tried to mould the company to suit them and not mould themselves to suit the company.  Each CEO has created more confusion and direction of the company changed very so often. It is important for the CEO to understand the ethos the company and then plan the way ahead. It’s not every day that you get a Steve Jobs who could change things! And he came back to company to which he had co-founded.

e) Get a new board
The board is to drive the overall vision of the company but the HP board has been an unmitigated disaster. Their selection of candidates has been pathetic and so to have been their understanding of the business they govern . They have also not guided the CEOs. 

There is still a lot of hope and the doors to growth are not shut. It calls for a mix of culture re-orientation &  practicality in approach. 






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