business news in context, analysis with attitude

Published on: August 16, 2011

by Kevin Coupe

There was a fascinating blog post on the subject of loyalty marketing, written by Kathy Sierra on GapingVoid.com and sent to me yesterday by several MNB users. It makes a point that often has been made here on MNB, but does so with specific and compelling language, and is worth sharing.

The posting reads, in part:

“Customer Loyalty” is a figment. Business “Loyalty Programs” are nothing more than rewards-based marketing. And by rewards (aka “incentives”), I mean bribes. That we so easily refer to a customer with a bagel punch card or virtual badge as more “loyal” is an example of just how far we’ve allowed corporations to abuse the language around human relationships.

I would storm a burning building to get my kids. THAT is loyalty.

I would even storm a burning barn to get my horse.

But I won’t storm a burning Best Buy no matter how awesome their Reward Zone program.

I’m not going to become more loyal to a business no matter how well-executed their Super Awesome VIP Exclusive Content Access Status Rewards Achievements Gamification program is ... That I often DO buy (and sometimes buy more) from the businesses that offer formal Rewards Programs does not imply I am loyal to those businesses. I’ve nothing against my wallet-full of coffee cards (which I use, and appreciate). But that is not loyalty. I’m happy to “LIKE” your Facebook page for an entry in your iPad giveaway, but that is not loyalty.”

Sierra goes on:

In fact, when you “incent” me to “engage” with your site, deep in my heart I understand now that I have sold out. By giving me bribes/incentives, no matter how much you call them “rewards”, you have communicated to some part of me that if I had to be incented to buy/act/engage/whatever, it must have lacked value on its own. This de-valuing effect can be true even if the thing really DID have intrinsic value for me. In other words, even if I’d actively wanted to do the thing-you’re-bribing-me-to-do, you’ve tainted it. Possibly even wrecked it for me, even if I am not consciously aware.

Here’s a great turn of phrase:

If we have to pay to get it, it’s not loyalty.

Here’s where she really kicks it into gear:

I DO have a few products I appear loyal to:

I would give up my iPad for Adobe InDesign.

I would give up sleep for the latest Neil Gaiman book.

I would give up carbs for my Astund Icelandic saddle.

And I’d give up all of the above to keep using my Mac.

That sure looks, sounds, smells, quacks like loyalty.

And it is.

But it is NOT loyalty to Adobe, Gaiman, Apple, or my Icelandic saddlemaker.

I’d walk through hot coals for those because I’m loyal to… myself.

The key to understanding (and ultimately benefitting from) true “customer loyalty” is to recognize and respect that customers–as people– are deeply loyal to themselves and those they love, but not to products and brands. They are loyal to their own values and the (relatively few) people and causes they truly believe in. What looks and feels like loyalty to a product, brand, company, etc. is driven by what that product, service, brand says about who we are and what we value ... If I buy from you it’s not because I like you but because I like myself.

And, a big finish:

Of the four products I appear loyal to, none have ever given me an extrinsic reward. No punch cards, frequent-purchasing discounts, or Exclusive Access VIP Status (Now! With Better Badges!). No leaderboards, no contests, no discounts. But all have given me something far more valuable: enduringly rewarding experiences.

They have upgraded my personal skills, knowledge, and capabilities. They have made my life better. They have made ME better. THAT is the ultimate customer reward. When you give your users that, you still won’t have loyalty, but you’ll have something sustainable, robust, and honorable ... The companies who we appear loyal to are those that best help us define, refine, and express who WE are.

That’s terrific, eye-opening blogging. (I’m jealous.)

You can read the entire post here.

And it makes a critical point - MNB Rule # 6 - that every business using so-called “loyalty marketing” programs needs to think about.

A loyalty program does not make a customer loyal to a business. Rather, it proves to the customer - every day - that the business is loyal to him or her.

Published on: August 16, 2011

Reuters reports this morning that Walmart’s second quarter US same store sales were down 0.9 percent, “marking the ninth straight quarterly decline as it tries to lure back bargain hunters.”

In its report, Walmart said that US same-store sales improved each month during the quarter, and claimed that while fewer customers were visiting its stores, their average transactions were higher.

The Financial Times reports that “net income at Walmart rose 5.7 per cent year-on-year in the second quarter to $3.8bn, or $1.09 a share. Total revenues were up 5.4 per cent to $109.3bn.” And Reuters says that “profit beat analyst expectations as international sales, sales at the company's Sam's Club unit and a push to rein in expenses helped offset U.S. same-store sales that came in below analysts' forecasts.”

Published on: August 16, 2011

In the UK, Marketing Magazine reports that Tesco plans to relaunch its Tesco Direct service to make it more like Amazon.com.

Here’s how the magazine describes the redeveloped website:

“The 'major business transformation project' will shift the website from 'manual merchandising' to an automatic 'algorithmically merchandised' offer, similar to that used by Amazon.

“Each customer's content will be driven by recommendations and data feeds about topics such as sales and top-rated products. The integration of Clubcard data will mean that customers will see content reflecting their purchases, and those of consumers with similar profiles ... According to sources, the relaunch is broader than just creating recommendations, as Tesco hopes to bring all orders, preferences and Clubcard insights together.”

Published on: August 16, 2011

In Cincinnati, the Business Courier reports that Kroger Co. employees at stores in West Virginia and eastern Ohio have rejected a contract offer and could strike later this month if a deal isn't reached.”

According to the story, the proposed three year-contract would have covered 1,000 workers at 12 Kroger stores. The union says the two sides are not in synch on matters of wages and health care costs.

Published on: August 16, 2011

The Chicago Tribune reports that “in a city that loves its hot dogs, the nation's top two wiener-makers battled in federal court Monday over dueling false advertising claims that have already underscored at least one frankfurter truism: Marketing sausage can be a lot like watching it being made ... At stake in the legal battle is a $1.76 billion hot dog market dominated by Kraft's Oscar Mayer wieners and Sara Lee's Ball Park franks and whether either company's boasts crossed a line.”

Sara Lee sued Kraft over its claims that its hot dogs were 100 percent beef, while Kraft countersued over its claims of selling an “all-beef” hot dog. Both companies claimed to have won taste tests.

“As the trial opened Monday in federal court in Chicago,” the Tribune writes, “lawyers for both Chicago-area food behemoths argued over such frank-marketing minutiae as the difference between meat and beef and whether a taste test could even be considered valid without such vital condiments as mustard.”

Published on: August 16, 2011

The Los Angeles Times reports that an Arkansas woman was arrested in Springdale, Arkansas, “on a misdemeanor charge of larceny theft. She is accused of stealing copies of old Sunday newspapers in order to bulk up her collection of coupons and save her family some money.

The papers being stolen were unsold Sunday papers stuffed with FSIs that were gathered up by stores and left for the publishers to pick up; the woman reportedly was getting to them first so she could satisfy her “extreme couponing” habit.

Published on: August 16, 2011

• Bloomberg reports that “the ex-marketing chief of a former U.S. unit of Dutch grocer Royal Ahold NV pleaded guilty to conspiracy 13 months after his previous conviction for overstating earnings was overturned.

Former U.S. Foodservice Inc. executive Mark Kaiser, 54, admitted today in Manhattan federal court to participating in an $800 million securities fraud. At his sentencing Dec. 7, he could receive as much as five years in prison.

“Prosecutors alleged Kaiser made fraudulent representations about U.S. Foodservice’s financial condition in a bid to burnish his resume for a promotion at the Columbia, Maryland-based unit. He was convicted in 2006 of helping the subsidiary inflate profits from 2000 to 2003 by wrongly recording promotional rebates as income and sentenced to seven years in prison.”

• The Chicago Sun Times reports that the city’s legendary Moo & Oink chain, which sells things like chitlins, bacon, fried chicken wings, ribs and pork chops - primarily but not exclusively to minority customers - is in financial trouble and could be sold. Moo & Oink has four stores, plus a wholesale and online business.

The company’s owners are not commenting, but insiders say they are looking for a buyer.

• The Professional Recyclers of Pennsylvania (PROP) has recognized Weis Markets for its commitment to recycling and its program to recycle waxed cardboard used to ship and store fresh vegetables and meats.

In 2010, Weis Markets teamed up with Envirolog to recycle its waxed cardboard and produce Envirolog fireplace logs which are sold in Weis Markets stores. Typically, supermarkets send most of their waxed cardboard to landfills since it is difficult to recycle. Today, all 163 Weis Markets’ stores participate in this recycling program.

Published on: August 16, 2011

Starbucks CEO Howard Schultz has made the case that American corporations ought to shut the door on any and all political contributions until President Barack Obama and the US Congress reach “a fair, bipartisan deal ... that sets our nation on stronger long-term fiscal footing.”

Schultz said that as of now, that is Starbucks’ policy. And in fairly short order, he said, 50 other CEOs contacted him and agreed to take the same position - no personal or corporate contributions until Washington gets its act together.

Bloomberg reports that “among the recipients of Schultz’s e-mail were NYSE Euronext CEO Duncan Niederauer and Bob Greifeld, CEO of Nasdaq OMX Group Inc., who in turn e-mailed letters to companies listed on their respective exchanges.”


Schultz made the case in an email to Starbucks employees as well as in a series of press interviews, expressing frustration with the gridlock and inability to compromise in Washington.

The statements came as investment guru Warren Buffett wrote a New York Times op-ed piece suggesting that the government needed to stop “coddling” the super-rich and raise taxes on millionaires and billionaires. “I would raise rates immediately on taxable income in excess of $1m,” Buffett wrote. “And for those who make $10m or more – there were 8,274 in 2009 – I would suggest an additional increase in rate.”

In his email, Schultz wrote:

Our country is better than this.

Over the last few weeks and months, our national elected officials from both parties have failed to lead. They have chosen to put partisan and ideological purity over the well-being of the people. They have undermined the full faith and credit of the United States. They have stirred up fears about our economic prospects without doing anything to truly address those fears. They have spent a resource even more precious than the dollar: our collective confidence in each other, in the future, and in our ability to solve problems together.

As leaders in business, we have watched all this unfold, first with frustration and then with dismay. Like so many of our employees and customers, we are gravely concerned about the current situation. Today, with both humility and urgency, we propose to do something about it.

First, we aim to push our elected leaders to face the nation’s long-term fiscal challenges with civility, honesty, and a willingness to sacrifice their own re-election. This means not kicking the can anymore. It means reaching a deal on debt, revenue, and spending long before the deadline arrives this fall. It means considering all options, from entitlement programs to taxes.

This is what so many common-sense Americans want. That is why we today pledge to withhold any further campaign contributions to the President and all members of Congress until a fair, bipartisan deal is reached that sets our nation on stronger long term fiscal footing. And we invite leaders of businesses – indeed, all concerned Americans – to join us in this pledge.

We also believe in leading by positive example. And we believe that while the long-term fiscal challenge is serious, even more painful to millions of Americans today is the immediate crisis of jobs. Tens of millions are unemployed and underemployed. Right now our economy is frozen in a cycle of fear and uncertainty. Companies are afraid to hire. Consumers are afraid to spend. Banks are afraid to lend. Record levels of cash are piling up in corporate treasuries, idling. That cash is not being used to expand operations, train new workers, underwrite new ventures, or spark innovation.

The only way to break this cycle of fear is to break it. The only way to get the country’s economic circulatory system flowing again is to start pumping lifeblood through it. That is why we today issue a second pledge. Our companies are going to hire. We are going to accelerate growth, employment, and investment in jobs.

We do this because we want to set in motion an upward spiral of confidence. We are not waiting for government to create an incentive program or a stimulus. We are not waiting for economic indicators to tell us it’s safe to act. We are hiring more people now.

We invite leaders of businesses across the country to join us in this pledge as well – and to bring their stakeholders into the effort. Confidence is contagious. The best thing we can do now is to spread it.

This is a time for citizenship, not partisanship. It is a time for action. We don’t pretend that our two pledges are quick fixes. We just believe that in this moment of great uncertainty, the government needs discipline, the people need jobs – and leaders need to lead.

Our country is better than this. Let’s get things moving now.

Published on: August 16, 2011

...will be posted on Friday this week.

Published on: August 16, 2011

Lots of reaction to yesterday’s piece taking note of a column by David Lazarus in the Los Angeles Times about an admittedly unscientific survey he ran, in which he asked CVS customers how they felt about the retailer’s loyalty rewards program. Overwhelmingly, Lazarus writes, customers said that they did not want to have to bring in their receipts in order to redeem the “Extra Bucks” that CVS promises them, that is said to give them up to two percent back on their purchases. Instead, customers told Lazarus, they would just like the rewards automatically stored on their CVS cards.

And I commented:

I’ve been banging this drum for a long time, and I’m completely in agreement with Lazarus. It has always seemed to me that the CVS loyalty program - like a lot of so called loyalty programs - is more hat than cattle.

Lazarus has one passage in his column that I think makes the point extremely well:

“Now the company apparently sees greater financial merit in promising a reward but deliberately making it difficult for many people to receive it. In the most recent quarter, CVS Caremark pocketed $816 million in profit. Chief Exec Larry Merlo attributed that in part to ‘solid expense control.’

“Maybe CVS should remember that loyalty programs work both ways. If a company can't (or won't) live up to its part of the bargain, it may find that customers are all too willing to take their loyalty elsewhere.”

Boy, does he have that right.

MNB user Michelle DuFresne responded:

I TOTALLY dislike the “bring back your receipt” method for your reward.  The last thing I need in my wallet is more crumpled receipt paper.  It’s bad enough as it is with the ridiculous number of loyalty cards, key fobs and every other method of tracking my spend that we maintain in order to save a buck or two.  You’ve hit the nail on the head…..the financial cost of actually giving the loyalty rewards is too great!

MNB user Linda Hellman wrote:

I’ve stopped even looking at the CVS Sunday ads because they feature these fantastic bargains that I’m going to get if I show my card, but when I get to the store, the items are already out-of-stock (or maybe had never arrived). This has happened over and over, even when I hit the store first thing Sunday morning. I’ve complained to the store managers, suggesting they pass the complaint on up the chain of command to the district managers; the store managers response is typically I should come back on Tuesday after they’ve unloaded the truck. I don’t want to come back on Tuesday, I’m in the store on Sunday with a list and money in hand and nothing to purchase.

I’ve also complained via the CVS homepage feedback. To date, I’ve not had one contact back from the company. I drive past a Walgreens and a Super Target to get to CVS, and there’s a Super Walmart just down the street, none of which have consistent outages for sale items. These latter companies will continue to get my business, even if they don’t sponsor a so-called ‘loyalty’ program.

Another MNB user wrote:

Amen! The CVS program that requires you to bring in receipts for discounts totally turns me off. CVS used to be the first place I would go for drug store items, etc.. However, I view this as a cheap way to try to drive value to customers, and hoping that most do not redeem their coupons/receipts and it irritates me! I drive by their stores on the way to others. I think Rite-Aid also falls into this same trap.

Either offer value that makes it easy for me to take advantage of (stored on my card), or drop the program because the program is having the opposite effect on me!

Another MNB user wrote:

We shop at CVS and Dick’s Sporting Goods and a few other businesses with Customer Loyalty Programs. As an example of a better program in my opinion, with Dick’s you do your regular (not with two high school now college athletes)shopping and you get your quarterly points to redeem and additional cash off coupons plus additional point accumulator coupons mailed to you. Almost like some sort of a gift package. You get reminded of their store and and has bonus opportunities when you shop and is a bit more exciting program when you go back. Now they do expire in a couple of months and expire if they buried on the counter but has a better feel than to save part of one of your receipts and take it in when you shop there next.

We will continue to shop at both places religiously, plus the other businesses that have Customer Loyalty Programs, but there are clearly degrees of how customer friendly and exciting they are to their customers. That should be important to the company if they want to have a CLP.

From another MNB user:

I am a user of Extra Bucks and get the weekly emails from CVS.  Was delighted this week – when the email popped up to save $5 off of $25 when shopping there this week, was able to click a button to add the coupon to my card instead of having to waste a piece of paper and print it out.  One plans to shop there but then the week goes by – so more often than not have printed the coupons and not used them – to be able to click to add to the card was a great initiative on their part!  They also had a sidebar where you could click your opinion if the new feature was of value to you or not.

If that option exists, CVS is doing a lousy job of broadcasting it.

Finally, I got the following email about one reference I made in my commentary:

Ok, I tried looking up what your old timey saying meant: More Hat than Cattle and a definition of this slang phrase is nowhere to be found. A blog related it to President Reagan though. Please disclose the meaning. Too many cowboys (hats) and not enough stock (cattle) to watch over?

Okay, here’s what I suggest. Click here to listen to Randy Newman’s song, “Big Hat, No Cattle.” It’s a great song...and he, of course, is one of America’s great singer/songwriters.

(But in case you can’t access YouTube because you are at work and your employer has blocks on where you can go, “big hat, no cattle” essentially translates to “all sizzle, no steak.” Or “all talk, no action.”)