4 - Around the Wheel
What we are seeing, in effect, is the democratization of the shopping process, with other people rather than the traditional managers of brands providing information to the market, in effect taking on the labor of marketing. It is also becoming more common for firms to compensate shoppers for this labor and, given the downturn in the overall economy, more shoppers are open to the prospect of earning (or saving) by agreeing to contribute.
The author looks to her "wheel" diagram to identify instances in which there is opportunity to pay shoppers for their participation in the process.
Paying for attention is similar to what marketers have been doing with advertising for years, the chief difference being that the marketer is directly paying the audience for guaranteed attention rather than paying a media channel in hopes of getting attention.
There is also the opportunity to pay customers to consider and evaluate your offerings, through search engine programs that offer shoppers a payment for browsing commercial sites. It is largely the same in concept as paying them to view advertisements, but gives the shopper greater latitude in what kind of information they will browse, presuming they will gravitate to areas where they are more likely to purchase.
Participation is a catch-all category that involves paying shoppers for any action that is not related to attention, purchase, or advocacy. Payment for participation must be carefully thought out - it's only valuable if the activity in which they participate increases the likelihood that they will eventually make a purchase. Otherwise, it's activity for activity's sake, and does not accomplish any business objectives.
Using virtual currency to get shoppers to advocate and refer other is fairly commonplace. It's particularly effective when a brand is obscure or targets a segment that is difficult to reach with traditional media. The author asserts that peer-to-peer advocacy is twice as effective as company-to-prospect messaging.
However, when it becomes clear that a person is advocating to gain a reward for themselves, the credibility of peer-to-peer is undermined: in effect, it is no longer well-meaning suggestion from a friend by a shill from a paid commercial spokesperson.
One interesting tactic that takes some of the stink out of paid advocacy is involving charity. Consider the P&G program that offered to donate $1 to the Special Olympics for every "like" on Facebook: this was a highly popular campaign that helped build awareness, enabled people to contribute to a cause, and delivered a positive emotional association to the company.
Loyalty is the ultimate prize for marketers. Whereas a successful promotion earns one sale, winning loyalty secures many sales over a longer period of time, and loyal customers are known to be the most profitable customers to serve because they have a higher lifetime value (more revenue) and require less support (lower cost).
The author delays addressing loyalty for the moment, and concedes for now that genuine loyalty cannot be bought, and genuine loyalists are not motivated by financial reward, but there are opportunities to pay for activities that lead toward that status.
Barriers and Motivators
It is generally assumed that shoppers seek products to fulfill specific needs - and it is the desire to have the need fulfilled, or the discomfort of failing to serve the need, that motivate the customer to purchase a product. Far less attention is paid to stimulating motivation than to removing barriers that might prevent a shipper from purchasing a specific brand.
The impediments to purchasing differ according to brand and product category, but some of the universal barriers include a lack of awareness, not knowing where to find it, not recognizing the product is a solution to their needs, feeling it isn't worth the price, feeling it isn't worth the effort to obtain or use, and lacking belief in the product's claims. The same can be said for participation in programs, plus a few other concerns: security of personal information and social embarrassment.
A few random observations are added:
- Develop programs to address deficiencies. If your problem is awareness, a participation program will not be effective in addressing it
- Consider your program from the perspective of the shopper. What are you asking of them, and is your incentive worth the time and effort? This is one of the biggest obstacles.
- Consider opportunity costs. It's not sufficient to be worth the effort, you must also be more worth the effort than anything else they might wish to do with their time
- Relevance is an issue. Getting people who are outside your target market, who are not likely ever to purchase, is wasteful.
- Trust is an issue. Participation in a behavior-based program requires participants to trust the program with private information that won't be abused or sold, as well as trust that the reward offered will actually be paid as expected. This is especially true of social media, in which the concern applies not only to the vendor, but to the particular channel.
- Status is an issue. For any program that will be publicly visible, participants consider how associating to a brand will impact their reputation.
The author describes the "Ad Your Way" program at Sears that enables shoppers to get personalized ads and offers on mobile and website platforms. Targeted advertising is nothing new, but Sears also develops personalized offers. One innovative feature enables participants to indicate the price they are willing to pay for an item, which the store considers in pricing merchandise, and gets the immediate benefit of being able to more quickly liquidate stock at the end of the season.
Another example is given of Varolo (EN: Currently defunct) that enabled participants to sign up to watch advertisements in exchange for rewards and lottery tickets. They also implemented a sharing scheme in which a person who referred others to the site would get a portion of the income from their referrals, and people referred by their referrals, up to four layers deep
The drawback to this approach is that, while there was a guarantee that the advertisement would be seen by the intended audience, there was no guarantee that the audience would be in the right place in their shopping cycle to be motivated to shop.
Participation programs sometimes flounder because the reward is not worth the time or effort to the participants. Consider the low utilization rate of rewards programs that required shoppers to clip proof-of-purchase or UPC codes from products and then mail them in to receive a reward that would take six to eight weeks to arrive. The author returns to the notion that people are more willing to undertake effort under difficult economic conditions - and presents the statistic that coupon redemption increased 27% in the year 2009.
Mobile social media has been a boon for participation programs: the ease of being able to "check in" or scan a QR code using a mobile device lowers the "cost" to participants, which makes more people willing to participate. With this in mind, using an existing application, such as foursquare, rather than creating a custom application adds to the convenience.
One example is the Chili's restaurant chain offered customers free chips and salsa in exchange for checking in on foursquare and showing the waiter the confirmation screen (which contained a unique code). The firm claims to have gotten excellent results from the campaign.
(EN: it strikes me as a bit odd because most Mexican/Southwestern restaurants provide free chips and salsa anyway, so I wonder if this hasn't also been a cost-saver for Chili's - did the restaurant stop giving them away and require customers to check in? Snooping about online, I didn't notice any customer outrage, but it does look like a very cheap item that's often used as a promotional incentive.)
The goal of most loyalty programs is to capture a majority of the customer's purchases in a given category - generally calculated by dividing the number of purchases of your brand by the total number of purchases of the product category. Previously, it was estimated on segments of shoppers, but it can now be measured with greater precision and granularity. Loyalty targets are set by brand - for some, a 40% result is excellent, others might reasonably target 80% - and is often leveraged to cross-sell or up sell loyal customers to more profitable lines.
Many loyalty programs offer a discount for future purchases, which can undermine loyalty (the "loyal" customers are interested in the discount, not the brand), whereas others reward loyalty by providing a gift or reward for a series of purchases at the regular price.
The author considers the American Express reward programs, which provides "points" to cardholders for each purchase and additional points for certain merchants. There is absolutely no additional effort for the cardholder to participate - they just use their cards and points accrue automatically. The rewards are generous enough to be meaningful (it doesn't take long to earn one) and flexible enough to be desirable (a wide range of merchandise and gift cards).
Consider this in contrast to the cumbersome Starbucks Rewards programs. To use this program, the participant must buy a Starbucks card and load it with money from another source, then register the card online. Rewards are earned when the card is used at participating franchises (not all Starbucks outlets accept the card), there's a confusing system by which you earn "green" or "gold" level rewards, and it takes a fair amount of use to earn a reward. The author attempted to participate in this program, but found it to be too much of a hassle, likely "tailored for the convenience of the seller rather than the buyer."
Advocacy is not new, and word of mouth is as old as society itself. Much of what ahs been said in the past remains true of the present - consider Ernst Dichter's research on word of mouth, published in 1966, which defined some of the motives for advocacy:
- 33% of people speak to other about brands because the experience was so novel or pleasurable they felt it worth sharing
- 24% share knowledge is a way to demonstrate their connoisseurship and gain the esteem of a person who has inside information that makes them socially superior
- 20% make recommendations to help others, an expression of neighborliness, friendship, and caring
- 20% are interested in the messaging rather than the product, fund it interesting or humorous, and are passing along the anecdote
(EN: It's not clear how this information was derived, but it seems to be a bit suspect in that people may not report their true motives, or the researchers may be reinterpreting them. It's unlikely anyone admitted sharing knowledge to feel socially superior, but researchers interpreted this from their remarks - so I have some doubt about the percentages, though the motives are likely accurate.)
What's notable is that all of these motives are in some way about using the brand as a vehicle or opportunity for social benefit to the person who is advocating, generally enhancing his personal esteem or his relationships with others by sharing the information.
While there are a number of incentives to advocate, there are also barriers to doing so: when a person advocates for a product, their own reputation and credibility are at risk if the person to whom they recommend it finds it unsatisfactory.
The author also mentions blowhards, people who are constantly sharing opinions with others, even when it is not useful or even wanted. It is doubtful that their behavior harms the brands, and doubtful their word carries much weight, so they are a non-issue except that people recognize the need to be conservative in their own advocacy to avoid being perceived as a blowhard..
For certain classes of product, there is also an embarrassment factor. Few people will brag about, or even admit using treatments for venereal diseases, adult diapers, food stamps, and similar products. There are firms who hire celebrity spokespeople to make public confessions of their embarrassing conditions and advocate for a product, but most ordinary people aren't likely to be willing to do so.
This might seem obvious, but then consider Cottonelle's debacle in its "Get Fresh with a Friend" campaign, offering people a coupon for their "flushable moist wipes" product in exchange for suggesting it to a friend. The author allows that it might have been their intention to be funny or ironic, but it seems distasteful and awkward.
Groupon is an example of a firm that implicitly rewards advocacy: the firm offers a discount when a group of people show interest in a deal, meaning that people who are attracted to an offer must recruit their friends to accept the same offer. LivingSocial takes it to another level, in which a person can get the item for free if they can convince enough of their friends to pay for it.