All About Gemz Loyalty Program

One of the most exciting projects we have undertaken during my time as a consultant with Open-First was to work with Bryan Pearson, CEO of Loyalty One, on thinking through the future of loyalty programs. For 30 years Loyalty One has run a program in Canada called Air Miles Rewards. The question we began to wrestle with was whether the coalition model that Loyalty One had pioneered could be applied to local neighborhoods.

To try and answer this question we have launched the Gemz Loyalty Program. Focusing on locally owned businesses in neighborhood shopping districts, we have designed the program to be easy for shoppers and merchants to connect in a mutually beneficial relationship that encourages people to spend more money in their own local neighborhood.

Put simply -- every neighborhood wants main street to be successful. And yet, every day we find ourselves spending money online or at a chain store where we might get a slightly better price or more convenience, but we lose the benefits inherent in supporting local merchants. What are these benefits you ask? Civic Economics is one organization that has studied this question extensively and has conclusive evidence from multiple cities that shows the enormous economic impact that locally owned businesses have on local communities.

If our local merchants are more successful, we will have more vibrant cities, with higher sales tax revenues, leading to more city services and thus higher property values. The perceived savings of buying online or at a chain comes at a huge local cost.

Gemz aims to change all this by giving local neighborhoods a tangible benefit from shopping at local merchants on their own main street. By using the Gemz Application on a mobile phone (currently only Apple's iPhone) while shopping, customers of local stores can accumulate loyalty points (or Gemz) each time they shop at participating merchants. Think of it just like the airlines where every mile you fly earns points -- in a Gemz neighborhood every dollar you spend earns points. Shoppers save up for rewards, that are also offered in the local neighborhood.

For a merchant interested in offering the Gemz Loyalty Program, signing up is very easy. Any merchant can offer points to local shoppers through a printed coupon or from a mobile device.



Merchants can also elect to offer rewards to Gemz shoppers which can be in the form of free or discounted products or services. When local merchants accept Gemz from a customer though, they can redeem the points for cash -- making this a sale for the merchant even though it may be a free offer to the shopper.

In the months ahead we expect to launch dozens of neighborhoods but we have started in the Elmwood shopping district of Berkeley CA. Our second neighborhood is Menlo Park and we are expanding every few weeks. We know there is a lot for us to learn still about the loyalty business and how to help local merchants succeed, but what started out as a small experiment is now thriving and producing exciting results for everyone involved.

Five Modalities Model of Community Development

When considering community development as a part of marketing activities, corporations often forget the most basic requirements of inter-dependency and value creation. In 1986, researchers McMillan and Chavis wrote about defining a sense of community that it must have the following elements:

1) membership, 2) influence, 3) integration and fulfillment of needs, and 4) shared emotional connection.

Too often companies simply believe that a "community" is a cluster of people who expressed interest in their products or services, and that this can constitute a sufficient connection to continue to communicate AT these people.

Instead, companies must consider how they can bring value to the people of a community, not just expect value from those people. We have identified five core ways that companies can bring value to people and can develop this sense of membership, influence, integration, and sharing that is crucial in community formation. The first two, the easiest and most common, only allow a company to earn attention, even when they are accomplished in a context of "co-creation." But the other three modalities are much more powerful and can form the basis of a long-lasting relationship for a company with its customers and prospects.

These five approaches can be used both when a company elects to create its own community and when it engages with existing communities. While we have developed the use of these approaches in online environments, they are as valuable to consider when engaging in the physical world.



ATTENTION
There are two modalities useful in earning the attention of an audience, we call them "entertain" and "inform" although often (as with all five) they can be used in concert. The better the content, the more valuable it will be to an audience member, and the more likely it will be to result in some sort of response -- whether it is through sharing (passing the company's message to one's social graph) or through co-creation. A "better" content will be one that is in itself more entertaining or more informative, but also one that is more tuned to the needs of the people consuming the content as opposed to the desires of the company to achieve some transaction.

• INFORM -- In its most basic sense, informing communications are ones that help educate people about something whether it be a product, service, or the problem that such product or service addresses. For example, a company that sells do-it-yourself home repair supplies might simply advertise the low price of lumber available at their store. While this would be a form of "information" it is of transitive value and only relevant to those immediately in need of the particular goods on sale. Instead such a company could construct a website answering questions about how best to do various repair or construction projects. How, for example, to use that lumber to build a treehouse.

• ENTERTAIN -- Getting people to laugh has been a mainstay of advertising since virtually the first commercial messages were distributed. Whether as humor, spectacle, or narrative the notion that an advertising message can be coupled with some kind of entertaining content is well worn and works in the social space as readily as in other mediums. Finding those opportunities to create an entertaining envelope for your ad message which is also adopted by a community is somewhat more difficult than the onanistic pleasure we get from a good commercial on primetime TV. But a number of simple mechanisms are evolving.

ENGAGEMENT

But far more interesting than merely using this new social "channel" to recapitulate the attention models of old marketing, social technologies provide the opportunity to shift the model -- from one in which you as the marketer are seeking an audience, to one in which interested parties find you. This reversal is truly the core of understanding the current marketing revolution and why the old mechanisms will continue to decline in effectiveness while a new science of market engagement is needed.

The new engagement modalities provide a circumstance for a relationship to develop between a company and its customers (or prospects). Broadly speaking there are three possibilities:

• SUPPORT -- Facilitating the customer's experience of a product or service, typically by hosting an open collaborative space for customers to interact with each other. This can be moderated, mediated, or merely contributed to by the company with the objective in any such participation being to enhance the quality and credibility of the discussions. So for example, providing more accurate information is good, deleting an accurate (though negative) comments is bad...

• CONNECT -- Helping members of your market connect with one another hopefully toward some purpose that is related to the company's product or service. This can be as simple as hosting content and community on related topics or as sophisticated as providing a matching system that allows participants to identify themselves to others with compatible interests or objectives.

• COLLABORATE -- Truly the most powerful of the engagement modalities, when you can collaborate with your market, or at least help them to collaborate with one another, you provide the greatest (and most lasting value). As with any of these approaches, it is more powerful when directly related to the company's products or services, but this is also a place where "corporate social responsibility" elements often can appear.

These five approaches to building community should be used in combination, and the "devil is in the details" in getting the right strategy and execution. But this brief outline is at least a useful filter to apply to your organization's social activities and a useful starting point to ask questions about whether your current strategy is right or whether it is time for some new thinking. If the latter, let us know as we'd love to help -- Open-First.

Ambient Awareness meets Business Intelligence

Clive Thompson in a 2008 NY Times Magazine article reported on how "ambient awareness" is enriching our social lives as we have instant access to more and more real time information about our friends and colleagues I'm so Digitally Close to You). The rapid increase in the number of information sources, the speed new information is being generated, and the quantity of information available is equally impacting business processes from product development to marketing to customer service. In my consulting work this is one of the key technology shifts that I see companies struggling with as they re-examine how data is gathered to support decision making. Redesigning business processes to incorporate business intelligence from ambient sources will be a key part of redesigning companies over the next decade.

(This blog post is an excerpt from a long white paper that I am currently writing which I will post in its entirety when complete)

The term ambient intelligence (or AmI) was, according to Wikipedia, first used by Brian Epstein of Palo Alto Ventures in 1998 in a workshop for Philips on the future of consumer electronics. The world they and others began to describe had a set of key technology trends that together created a fundamental shift in the way we interact with the physical world including miniaturization, wireless communications, software platforms for distributed systems, improved human-computer interfaces, the general robustness of autonomous systems and a continuing reduction in cost for the deployment and maintenance of such systems

These researchers envisioned a world that by 2020 thoroughly connected people with their environments as sensors, transmitters and other devices became increasingly inexpensive to deploy, easier to program, and more connected. Ambient information systems can be generalized as following this common pattern: (1) the translation of the inherent information in our environment, such as the speed of passing traffic, into digital information via a sensor; (2) the transmission of this data through a computer network; (3) use and presentation of this data by a human or machine process (for example, traffic statistics super-imposed over an online map). I'll use the term "lens" to denote any system which is aggregating, analyzing, and presenting this data.

A simple example of this can be seen in the automated toll systems now in use in many western countries. A small transmitter placed in an automobile uniquely identifies the vehicle to a toll sensor, allowing the driver to be automatically charged a use fee as he drives past some fixed point on the roadway. In this case the lens is a machine process designed to associate the location of a specific vehicle with a financial transaction to be processed against a specific driver's account.

Augmented reality systems currently in their first consumer deployments through mobile phones also offer a glimpse at the human side of this coming world of ubiquitous information-rich interactions. The combination of a set of sensors including a digital camera, GPS, and a compass into a portable device with Internet connectivity allows information about an individual's environment to be retrieved as he moves from one place to another. Here the lens is a visual human-computer interface made possible through the video display of the digital device.

In just the same way that the physical world can be instrumented, detected, and thus better understood we can also instrument the virtual environments in which we are now increasingly communicating and conducting business. As Thompson points out, the innovation of Facebook's "news feed" in 2006 was not in the creation of new information but in the way that information was surfaced to Facebook users.

Facebook had already created a system in which inherent information about people's activities ("Tim and Lisa broke up") was being captured through the human sensor network of its users. The news feed suddenly provided a lens through which one could consume all of this information easily, providing users with a tool for comprehending larger quantities of data and presumable making decisions (I guess I should call Tim or Lisa...) and, as Thompson reports, startling and upsetting people who hadn't thought through the implications of putting this information online.

In the same way the inherent information in our business environments is increasingly being collected and stored online. Past Amazon CTO Andreas Weigend enjoys pointing out to clients that "more information will be created and stored this year than in every prior year in human history." Businesses must implement the right sensors for collecting and transmitting and the right lenses for aggregating, analyzing, and presenting this information.

For example, for a B2B client we recently added online social profiles to the set of information that sales people have about prospects as they try to follow up on initial product inquiries. Having more information available about that particular individual measurably increases the likelihood that the sales person can reach a prospect and have a meaningful conversation. But almost as important is how this information is informing the process of deciding who to contact in the first place.

Sophisticated sales organizations have long implemented "scoring" mechanisms for trying to decide who their most interesting potential prospects are within a given list. A weakness in these systems is that much of the information used for such scores is self-reported by the prospects (size of company, title, industry group, etc). Thus the ambient intelligence about these prospects -- the data they are creating all of the time as the use various online services -- can be significantly more useful in assessing the relative value of one prospect versus another.

Another example, marketing organizations are increasingly aware of the vast number of customers talking about their companies and products. Communications teams are establishing "listening posts" (sensor networks) to aggregate this information. Too often this information stops at an evaluation of "influencers" who can then be targeted for media campaigns. We have helped organizations recognize that key product insights, support issues, and other business processes can be informed by the collection of this ambient intelligence from the marketplace.

These are a set of ideas which we are only just beginning to understand about how business will change over the coming decade. When researchers began to define ambient intelligence a decade ago, they envisioned "...a world in 2020 where user-friendly devices support ubiquitous information, communication and entertainment." We can now see that the same technology trends impacting consumer products will also radically transform business processes and decision making. The most advanced companies have already begun using sensors to collect relevant information from their environments and are developing lenses to use this information in their activities. The development of these systems will be critical to competitiveness in the 21st century.

Defining Viral Marketing

I am so tired of hearing the word "viral" -- especially in the context of a sentence like this one: "We need a viral video - can you help us create one?" Or like this one "do you do viral marketing campaigns?"

Now I am sure that I know what people mean when they say these things. They mean, can I spend a little money to create some content with my brand name all over it, and then get that content viewed by millions of people for free? In other words, can I fundamentally change the attention/cost equation of reaching my market with my brand message?

In order to understand why this is fundamentally the wrong question, it is worthwhile to go back to the original idea of online "viral" marketing, understand what a virus is (and thus why this phrase was introduced), and then address what companies CAN do to achieve that objective -- fundamentally changing the attention/cost equation...

So lets turn the clock back to July of 1996 when an innovative web company was introduced and then really began to take off, showing the kind of exponential growth that Internet sites are now famous for achieving. The company was Hotmail. Tim Draper, one of the company's investors, attributed the success of HotMail to something he called "viral marketing," specifically referring to "...Hotmail's e-mail practice of appending advertising for itself in outgoing mail from their users."

This to me is a much more useful definition of viral marketing than the more general usage of individuals proactively passing a piece of advertising around amongst themselves -- it gets at the heart of why it works.

So WHAT is a virus? A virus, as Wikipedia so helpfully tells us, is

a sub-microscopic infectious agent that is unable to grow or reproduce outside a host cell.

In the case of Hotmail, the host cell was an email message. The infectious agent was a tagline at the bottom of the message which said something like "get a Hotmail account for yourself" -- that is, a call to action to get this free web-based email service.

Why is this important? Because the thing which Hotmail was doing was NOT the virus, the virus was something users of the service passed along to each other unintentionally through using the service.

Which brings me back to how companies need to think about viral marketing -- the starting point is to determine what value the company can create for its target market. After determining what valuable contribution to this market the company can make, then the company can design a virus to be implanted within that host which does the work of spreading the company's message.

Please - stop with the "make me a viral video" - and start really creating value for your markets. You'll find that when you do you earn awareness, then attention, then respect. And you'll succeed in fundamentally changing the attention/cost equation of reaching your market with your brand message.

Replacing ANTI-Social Marketing (part 2 of 2)

(Part 2 on the replacement of anti-social marketing) In the developed world, and increasingly throughout the population of the emerging economies, we now have a mass-connected social information space. This is in contrast to the one-way broadcast information space which was the dominant model of the past century. That mass media model, of course, replaced local community information networks (word of mouth) as the primary way that we learn about our world. In doing so it allowed people to have a broader view of the world and be informed by a much more educated and diverse set of communicators. That is to say, there was a lot of good that mass media brought to communities and individuals by comparison to the local, parochial, and often xenophobic news gathering that we engaged in before mass media.

It is too early to say definitively that the technology which enables a mass-connected social information model has similarly improved upon mass media. I am not an adequate student of history to readily have examples of the critique that may have been made of mass media as it began to transform society. But there are certainly many critiques in our own time of the emerging "social media" from how our society will continue to have adequate watch dogs for various institutions (government, business, etc) to a general dismissal of the vast majority of "non-professional" content as being of low quality.

With respect to the first of these two complaints, the concerns are centered on the economic model which emerged over the past 100 years for supporting investigative reporting, namely advertising. A symbiotic relationship developed in which the high ideals of the fourth estate became dependent upon the corporation, or even the managers of the corporations (a sort of modern second estate). While this symbiotic relationship provided some illusion of independence for the individual journalist, the history of the media business has certainly been rife with examples of complicity between the owners of media and various elements of authority within society.

And so it may be that the coming change in the relationship between "advertiser" and "media" presents a similar opportunity for improvement over the old way. While such analysis will come year in the future, one thing we can be sure of today is that the change is upon us and that there are a set of new behaviors (as illustrated in this diagram) in which companies must elect to engage as a replacement for old marketing styles. Each of these deserves (and will get) a blog post of their own in the weeks ahead, so these descriptions are intended to simply introduce each of the three.


CONNECT vs INTERRUPT
Just as the fundamental behavior of the old marketing was interruption, the fundamental behavior of the new one is connection. It is increasingly ineffective to purchase space in broadcast media in order to insert the interruption of a company's marketing message.

image from John Willshire's terrific slide presentation on the future of advertising
Instead companies, and more importantly, their employees need to connect in meaningful, interesting, and authentic ways with their markets. And companies need to facilitate connections between their employees, customers, and prospects. The new information space is governed by the connections that we chose to create. Companies have to earn the right from individuals and communities to be a participant in these networks of connections.

Earning that right requires that companies create a context for the connection which is relevant to the individual or community. Under the old interrupt model, it was quite easy for companies to focus only on their own objectives -- "call now, operators are standing by..." Instead companies need to begin to think about how they create value for the people they want to reach.


COLLABORATE vs ENTERTAIN
Collaboration can take a number of forms - companies can co-create content with their customers, encourage customers to create content, or foster other kinds of collaboration. Where entertainment was an attempt to add value to interruption, collaboration can be an activity which adds value to connection. Collaboration can engage companies with their markets around new product development, marketing a product, selling a product, or extending a product experience through some new activity related to the product. Starbucks, for example, asks people to work together and with the company to develop ideas that improve their stores. Cadbury created Jivebrow09 in order to invite fans of their chocolates to create new versions of their television advertisement. And Lego has supported a number of independent collaboration communities around its "toy" bricks, including BrickWiki which offers detailed information, all collaboratively created, on building elaborate projects with Legos.


SUPPORT vs INFORM
As outlined in part one of this post, one of the key problems when a company seeks to "inform" the marketplace about its own products is the inherent conflict of interest. Why should I believe the company which clearly wants me to buy its products? Instead companies must learn to support customers in finding the information relevant to them about the company and its products. Third party sites such as Yelp, with service reviews or GetSatisfaction with customer service offer interesting examples to companies for how their customers can provide trusted information about them in venues where the companies themselves are also welcome to participate. Taken broadly, any activity a company engages in which supports their customers or prospects in obtaining relevant information is far superior to one in which the company itself tries to authoritatively be the source of that information.


What's next for media?
Throughout these two posts I have looked at the transition from anti-social to social marketing from the perspective of the companies engaging in these marketing activities. But there is of course a really important warning and opportunity for those media companies which have grown up symbiotically with companies. Media companies need to start thinking about how they can help to facilitate connection, collaboration, and support instead of seeing themselves as vehicles for companies interruptions.

A media experience that contains interruptions will be worth less than one that does not. And a media experience that connects its readers/viewers/listeners is one that will be worth more than one that does not.

The magic here is for the media to start thinking of themselves as being facilitators of community -- of being a part of the mass connections that are bringing us all together online. In doing so they could become enormously valuable intermediaries in the activities of companies to engage with their markets.

Replacing ANTI-Social Marketing

For most of the twentieth century and even through the first decade of the twenty-first, marketing has been anti-social. The three primary modalities of advertising have been Interruption, Entertainment, and Information. While these methods were effective in a one-way mass media world, they are failing in a mass-connected social world. It is time that marketers learn to replace these anti-social marketing methods with three new social modalities - connection, collaboration, and support.

Before I explain how the new approaches can replace the old, it may be useful to once again explain why the old approaches are failing and are anti-social, even in a dictionary definition way,

Antagonistic toward or disrespectful of others; rude.

Eric Clemons, Professor of Operations and Information Management at the Wharton School of UPenn offered this very interesting article on Techcrunch, "Why Advertising is Failing on the Internet" and Doc Searls followed up with "After the Advertising Bubble Bursts." A pleasant half hour can also be spent on John Willshire's "The Future of Advertising in One Afternoon" (available as an easy to skim slide deck).

What all of them are talking about is that the transition from a one-way broadcast media to a deeply interconnected two way communications medium is, to use Clemons' word, shattering advertising. Ultimately the goal of the three strategies of interruption, entertainment, and information is the same -- get attention for a company's brand, product, or service. The common theme here is that companies must now work to earn attention through the social communications medium as opposed to being able to simply buy attention from the control points in the old mass media model.

THE OLD: ANTI-SOCIAL MARKETING

INTERRUPTION
For awhile now the old ideas of interruption marketing have been receiving challenges. Seth Godin offers a great description of the underlying problem of interruption in his book Permission Marketing and nicely summarized in this short essay by Angelo Fernando entitled "So Interruption Marketing Isn't Working"

Let’s say you’ve gone to the airport early morning. Someone walks up to you, and asks you directions to a gate you’re not familiar with. Since you have time to spare, and don’t mind the interruption, you try to help the person out.

Now imagine it’s later in the day at the same airport. You’re late for your flight, and someone asks you the same question. Will you give him the same attention? Finally, a third scenario: You’re late for the flight, the airport is crowded, and this is the fourth person to ask you the same question. What are the chances you will pay any attention at all? You’re probably going to even develop a strategy for avoiding further interruptions –not making eye contact, brushing them off, refusing to help.

This is the simple case - information overload or "smog" - as a reason that interruptions are not working. So many interruptions are competing for our attention that we have developed strategies for avoiding them. But there is something else happening here as well, something deeply anti-social.

When advertising was presented as part of the one-way stream of information arriving on our porches, radios, or televisions we accepted that advertising as a part of the total experience of the medium. But once the medium for information becomes two-way, interruption advertising becomes disrespectful or even rude. Imagine yourself in a conversation with another person:

You: How did you like that episode of Heroes?

Friend: It was great I really liked the special effects

--interruption-- Buy Heroes T-Shirts NOW --interruption--

You: Anyway, as I was saying...

This conversational example is an anecdotal way to illustrate what happens when the directed engaged communicating online user is interrupted with advertising - even when it is "contextual." To expand on this illustration, consider two shifts at work here that contribute to the downfall of interruption --

(1) Freedom of Choice -- more and more information sources are emerging which have the relevant information that we may want. Sources which are free of interruption and easy to navigate will be preferred over sources which are choked with interruptions. In addition, we have an increasing array of strategies to eliminate the interruptions from the information we consume - Tivo, pop-up blockers, etc. This expansion of choice also leads to the second shift...

(2) Seek vs. Browse -- when we received a bundle of information which happened to include advertising, we would browse through all of it and select that which was most interesting (sometimes even advertising). Now an increasing amount of our media diet is search-originated and it is much more difficult (and unfriendly) to interrupt someone when they are pursuing information in a directed mode. Even how we browse is shifting with more of it happening in social spaces in which we are browsing what our friends are doing, thinking, watching, reading. Learning about something interesting to read from a friend is a much more difficult (and unfriendly) mode of behavior to insert interruptions.

Interruption, the corner stone of the advertising industry, is "shattering."


ENTERTAINMENT

When is an interruption not an interruption? When it makes us laugh? When it is art? Although not everyone can agree on what is funny, or what is art, or (more broadly) what is entertaining, a stand-by of the advertising industry to rise above simple annoyance has been to create advertisements which in some way entertain.

And sure, the "bud - weis - er" frogs were amusing. The first time. Which is why the company has had to run thousands of different "funny" advertisements over the past few years -- once a particular punch line has been laughed at, it's time to move on to the next one. Very few "entertaining" advertisements are as entertaining the second, third, or fourth time we see them.

And this may not be the biggest problem with entertainment as a method of advertising. The biggest problem is more likely to be -- does it even work? Do people watching an entertaining advertisement actually remember what brand was associated? And if they do remember, is the association positive or (as in the recent case of the GoDaddy.com Superbowl ad) can you actually do damage to your brand?

The core problem is that the "entertainment" is probably not core to the brand value. So while a scantily clad woman may get attention, it doesn't actually communicate anything related to running say, an Internet service (as in the case of GoDaddy.com).

Obviously entertainment products can be a lot more successful using entertainment as a building block for an interrupting advertisement. A snippet of a song, for a singer. The movie trailer. Any excerpted material from an entertainment product can itself be entertaining as well as remaining core to the brand value -- sometimes the trailer IS the core value and is better than them movie itself!

But leaving aside entertainment products, why should a beer company, an auto manufacturer, or an accounting firm use entertainment as the content of a strategy for getting people's attention? Because it is less irritating than an interruption that doesn't entertain?


INFORMATION

Finally, the last of the core modalities of twentieth century advertising - provide people with information. What a great idea. People need information and companies can be the source. Want to buy a new Ford Taurus? Get all the facts at ford.com... or should you? Why would you trust the company that wants to sell you the car to give you honest information about the car? According to Edelman's "10th Annual Trust Barometer"

Trust in corporate communications like press releases, reports and emails fell to 26% from 38%; a company's own Web site to 24% from 31%; and corporate or product advertising to 13% from 20% among informed publics ages 35 to 64 in 18 countries. (emphasis added)

Just 13% of people "trust" advertising. And you can expect that this 13% is the most trusting of any communications from anyone -- not the best audience on which to build your business strategy.

Of course the other problem with information based advertising is getting it to the right person at the right time. While I may be interested in price information on a new car when I am making a purchase decision, I am definitely not interested in such information a month after my purchase. Search engine marketing is the one place where an advertiser has a high likelihood of success in placing information in front of a potential customer at the moment of interest, and for this reason it is, so far, an enormously successful advertising medium.

But given a choice between information from a peer and information from a company, there is no doubt (as Edelman's survey shows) that people will chose to heed information from a peer when making a purchase decision.

Even advertising as information fails when social communications reaches critical mass and exceeds one-way broadcast as the way in which we gather knowledge and entertainment.

Next post -- How the new will replace the old - connection, collaboration, and support.