While we do not espouse the virtues of coalition loyalty programs, the more that bedrock frequent flyer programs devalue their miles, the more they open the door for coalitions and other "synthetic" currencies.  More importantly, the devaluation of frequent flyer miles makes it even more important that companies figure out the best loyalty proposition for their brand, their customers and their business.  Not for the airlines.

Given our obsession with how companies market to customers, it's pretty easy to write about examples of companies doing things poorly.  So we're going to try and point to some companies doing just the opposite - doing smart things to connect their brand with their customers.

One strategy that we steadfastly support is exclusivity.  In terms of a loyalty program, this can mean members-only offers and it can also mean an entirely unpublished program.  Given the preponderance of programs, especially ones with flimsy value propositions (or other weaknesses...wait - we committed to staying positive), we expect to see more and more unpublished programs.  It's sort of the loyalty marketing equivalent to "double secret probation."

Unpublished programs and other marketing strategies based on exclusivity allow customers to feel genuinely different and more special than non-customers, or even "other" customers who might not be quite so intimate with the brand or company.

Two brands worth noting here are Jack Daniels and Gilt.

Not long ago, I was invited to be a Tennessee Squire, an unpublished program called the Tennessee Squires Association that was started in 1956 to "honor special friends of Jack Daniels Distillery" according to Wikipedia.

While there are many spirits brands spending large sums of money doing things not so well, Jack Daniels does a positively brilliant job of using this program to build its brand and its brand ambassadors.  If you're interested send me an email and who knows, you could end up a fellow Squire. 

Another great example is Gilt Groupe, which per the public portion of its website, explains that it "is a private online community, which is dedicated to providing its members with access to coveted fashion and luxury lifestyle brands at sample sale prices."  Again, you need to be invited to join and only members can do the inviting. (yes, send an email and I'm glad to refer you!).

There are many other reasons for exclusivity and unpublished programs, not the least of which are the ability to better control costs and program size.  Even better, however, is the ability to test, innovate and ultimately create more meaningful, productive and sustainable relationships between your customers and your brand.

The timing is pretty good, as in USA Today there was a big story on the increasing financial pain being shared with (inflicted on) passengers by the airlines.

The bulk of changes at AAdvantage are added fees and mileage requirements for upgrades.  This will serve to make upgrades both more available (ok - this might be relative but it shouldn't hurt) and help the airline from a yield management standpoint, assuming it gets more business travelers to actually pay more for front cabin seats. 

One thing AA did not change were reward levels for domestic coach.  This is both smart and not surprising, as American has been way ahead of Delta in terms of mileage sale revenue to partners and they would be devaluing their miles by increasing reward levels. 

Finally, on a related note, SkyMiles today sent out an email offer of half-price tickets for Atlanta Braves games.  This follows similar moves related to their sponsorship of the Atlanta Symphony Orchestra and serves as a nice value-added "surprise and delight".

For a long time the irony of the airline industry has been that the only way they have consistently made money was through the frequent flyer programs.  Airlines have set up subsidiaries to house the programs and in some cases (Aeroplan) even spun them off into separate, publicly traded units.

As we have discussed here, the airlines make money selling miles to partners and consumers at rates that are typically around $0.02, though lower for large partners and higher for consumers.  Their "cost" on the miles when redeemed is typically well under $0.01.

So when the number of miles needed for a free ticket goes up, it effectively decreases their cost of redemption for the airline and it also lowers the value for the frequent flyers.  For example, if you can purchase a ticket for $250 and it takes 50,000 miles, as a frequent flyer you are only getting $0.005 in value (half a penny) for your miles.  At 25,000 miles you are netting $0.01 per mile.

With the new three tier system, you can expect that most seats will be priced at 40,000 though on more attractive flights the seats will be 60,000 miles.  These compare with 25,000 and 50,000 miles today.  When seats are only 20,000 miles, they will be a pretty good deal.

Of course the value is largely a function of what the ticket would cost if you were paying for it.  This is where it is imperative to do the math.  If you are pricing a ticket and it's more than $600, even at 60,000 miles it is a reasonable value ($0.01 per mile).  At 40,000 miles it's $0.015 per mile.

The other significant implication of these changes devaluing the miles is the impact they will have on the frequent flyer partnerships.  The partners are now buying miles from the airlines and those miles are, at least in our opinion, worth less with these program changes.  If you're a partner you'll want to renegotiate your deal with the airlines so that you're either paying less per mile or getting more miles per dollar you spend.

If you're a frequent flyer collecting miles from partners, especially credit cards, pay close attention and do the math as suggested above.  The market value of miles and points earned from credit cards these days is around $0.01 so you want to make sure that you are earning points and miles that are at least that valuable.

No one should be surprised about the frequent flyer program changes.  Delta has actually done a very good job in effectively "raising prices" but providing more value (i.e., last seat availability) as well as other recently announced program changes such as Pay With Miles. 

Still, frequent flyer miles are continuing their decline in value and that is not going to help an already challenged industry. 

They were standard-issue qualitative research questions but one was quite striking, not just as it relates to banks, but to so many other industries as well.

During the same week in The Wise Marketer, there was a short piece from a research report indicating that a majority of bank customers, 63%, plan to switch primary banks, with a similar percentage intending to switch insurance providers.  These numbers echo an IBM study that boldly concluded that a significant majority of customers have little or no emotional connection to their bank.

With only a small handful of exceptions, namely "ThankYou" from Citibank and the new Chase Exclusives, banks have been noteworthy in their failure to embrace what we call "whole-bank" loyalty.  Yes, there are thousands of credit cards out in the market with loyalty "features" but these are often the extent of a bank's loyalty marketing efforts.

There are a number of reasons for this, including a bank's product- rather than customer-centricity, largely reflecting being organized around products, in silos, rather than by customers.  Of course like all industries there are exceptions, including the smaller and more nimble banks (particularly those catering to high net worth individuals and businesses).

The lack of loyalty in banking is one of great irony.  While loyalty is often (and largely) a function of habit, real loyalty is driven by an emotional connection and certainly people are, for the most part, quite emotional about their money.

So the question that struck me from the bank VP Marketing?  It was simply about how I thought they should thank the bank's customers.  My answer:  the bank should figure out how to get the customers to want to say thank you to the bank! 

In order for this to happen, the bank will need to shift its focus from being product-centric and take a customer-based approach to growth.  Having a customer thank them for being their bank should be the bank's ultimate objective. 

Describing loyalty as expensive is a bit like saying that cars are expensive.  Sure it's cheaper to take the bus (mass transit), but that assumes that it will get you to where you're trying to go, on time and with relatively little inconvenience.  The bus gets "expensive" too if you're late and miss an appointment, if you have to stand, or especially if your origin and destination aren't anywhere near the bus route and you need a ride to get there!

Loyalty marketing can answer some very explicit and precise questions.  It can tell a company who its customers are as well as when, how often and what they buy.  More importantly, it can allow a company to directly address (i.e., communicate) directly with its customers and get them to buy things.

For marketers, loyalty is more like a car.  The unfortunate reality is that not everyone likes to drive or can afford a car.  It's a lot more expensive than taking the bus or the subway but (unless you live in New York City) it's much more practical and gets you to exactly where you want to go, rather than just in a general area.

So yes, compared to other marketing initiatives and disciplines, loyalty is expensive.  Like other certain other expensive things in life, it is worth it, as like so many other things, you get what you pay for.

Advertising, which still commands the bulk of marketing spending and was over $230 Billion for 2007, is only now being measured in terms of actual sales.  In fact last week Ad Age reported that (alas) a definitive study linking TV advertising to actual sales was being undertaken "to answer advertising's million-dollar question: Do TV ads make consumers go out and buy products?"

The value of loyalty marketing is driven by a number of things, including certainty (i.e., defined risk) and the outcome, which, when done right, is directly measurable revenue and profit -- with highly mitigated risk.  Unlike acquisition-oriented direct marketing, advertising or even most promotional marketing, loyalty is an investment in the means to talk with your customers for a long time.  It's what makes relationship marketing not only possible, but more effective.

The metrics for loyalty are unlike most other marketing disciplines, which tend to deal in cost per thousand impressions (again, mass transit...or marketing) versus metrics like customer profitability, incremental revenue or, at a basic level, cost per incremental sales dollar.  Yes loyalty is about selling things - usually more things to more people more often.  And that should command a premium.

So when I fell just short of requalification for 2008, I was fully prepared to be downgraded to Gold Medallion.  Lo and behold it is late February and guess who is still a Platinum Medallion!?!  Of course this is wonderful and keeps me engaged and loyal to Delta, but as a loyalty practitioner, it is compelling to point out where Delta is really missing out on a great opportunity.

When designing loyalty programs, one thing we look for is an opportunity to package and merchandise things that companies are doing that they are not getting proper "credit" for from their customers.  Things that need a bit of romancing in order to bring them to life and create more customer value.  We love the often cited line from "When Harry Met Sally" where Billy Crystal and Meg Ryan's characters are, let's say, beginning to engage in physical intimacy, and she says to him, "At least kiss me when you do that!"

Delta should consider kissing everyone that they soft land as they are not getting proper credit.  Members might feel grateful and appreciative, but they also might be thinking that Delta made a mistake and thus it's only a matter of time before they're downgraded.  Or worse they might not fully realize that their status is the same and switch carriers!

Whatever the reason (even if it is cost savings - i.e., by not having to re-fulfill credentials), Delta should take this opportunity to kiss its customers.

For too long, America's leading retailers and the investment analysts who track them have held "Comp Sales" (also known as "same-store-sales") as a sacrosanct measurement of performance.  The measure is expressed as the percentage change in revenue on a store-for-store, or comparable basis and certainly an indicator of retailer health. 

As if to call the emperor naked, over the last year or so, more and more retailers have elected to either not report these numbers or to report them less frequently.  They cite that the number is either over-rated as an indicator or too short-term in nature.  While it might be both, the real shortcoming is that it presents a shallow perspective on how the business is doing.

So, Home Depot pushed back.  So did Starbucks and Bebe Stores, Charming Shoppes, Dress Barn, Guess, Gymboree, New York & Company and Talbots.    Yet despite what these retailers are refusing to report publicly, comp sales are the key number that these companies look at internally on a daily basis!  The emperor is still in the buff.

So much for Sarbanes-Oxley and company transparency.

There's nothing inherently wrong with the "Comp Sales" metric.  So what's wrong?  If Home Depot and Starbucks are right and "comp sales" is not the key metric, what is?  Even Eddie Lampert, the hedge fund manager controlling what is left of legendary Sears, thinks there is a better metric (though he doesn't say what it is!).

Yet no one is reporting one.

Consistent with the way so many companies in the US and around the world manage their business, the traditional comp sales metric is missing the point.  If you think about what drives store-level (and ultimately all) sales, it's very simple:  Customers. 

Perhaps the most important measure of a company's organic growth and customer loyalty is not (just) comparable store sales, but comparable Customer sales, or Comp Customers^TM.  It's a metric we use when measuring customer loyalty and assessing the opportunity for loyalty marketing for a given business.

Consider that a company's customers are its true revenue-producing assets and thus just like stocks in a portfolio.  If those customers spend more, they appreciate in value and the portfolio goes up in value, the same way as if individual stocks increase in value. The other way to grow the portfolio, of course, is to add capital, or in this illustration, acquire new customers.

Just as any mutual fund or hedge fund is judged by the returns its investors receive, companies are ultimately rewarded the same way.  The better they are able to grow the value of their customers, the more the company will grow, with or without acquisition.  This organic growth is what commands a premium from investors.

Without growing existing customers, new customer acquisition is simply replacing lost revenue, rather than being true organic growth.  When existing customers are growing, acquisition drives even higher rates of growth.  When you consider how much more expensive it is to acquire rather than retain an existing customer, you understand the true importance of a metric like Comp Customers.

A few weeks ago Starbucks' Chairman and CEO Howard Schultz declared that the company would no longer report comp sales, rationalizing that the company had been too focused on improving same-store sales rather than the customer experience.  According to reports, Starbucks plans to introduce new quantitative metrics beginning in Q2.  It will be interesting to see what these metrics will be.

This concept does not just apply to retailers.  It's really appropriate to any business with customers (and what businesses don't have customers?!?). Maybe we'll see hotel companies report REVPC (revenue per customer) instead of REVPAR (revenue per available room)? 

While there are definite challenges in developing Comp Customer reporting, the value from these data and information is more than worth the effort.

It is our expectation that as more companies realize the value of identifying and engaging customers in order to build those relationships, there will be some leading companies willing to go out to the public and report Comp Customers, the same way they report other key business performance metrics, like store comps.

(c) 2008 rDialogue LLC All rights reserved.

So in the interest of making customers happier and companies more profitable, here are our top customer loyalty marketing-related resolutions for the year.  Over the next few months we hope you'll further the dialogue on these issues and others presented here.

In terms of context for 2008, there are lots of ingredients stirring the pot but there are two that are most important here - the economy and elections.  These two combine to stress out both consumers and corporations, especially in terms of their ability to receive communications.  At the minimum they add to the already increasing clutter in their minds, hearts, in-boxes, and yes, on their Facebook pages.

As with any stress or anxiety, there is only one solution:  work it out.  This means being disciplined, understanding the situation and taking action. 

There is an article in last Saturday's New York Times that is well worth reading about Amazon, now a $15 billion retailer!  To put that in perspective, that is more than 50% larger than Nordstrom, another Seattle legend in customer centricity.

In the article, Joe Nocera anecdotally relates a holiday shopping experience that he has been talking up since the holidays.  Further, it made him look at Amazon's stock price and discover that their financial performance has been stellar.  Investors are realizing the benefits of Jeff Bezos' strategy that being obsessed with customers translates into growth and profits.  Given that Bezos owns more AMZN stock than anyone, he has his, and every other shareholders' interest at heart (and wallet).

Their numbers are simply awesome:  72 million active customers who spent an average of $184 last year versus $150 the year before.  That is how you grow your business by 35%:  increase your existing customers' business by over 20%.  Simple, though easier said than done, especially for public companies.

The Amazon story is a great setup for our resolutions.

Resolution #1:  Have a strategy and be disciplined in following it.

It seems that with increasing frequency, more and more companies are pursuing tactics in search of a strategy; or, as a former boss characterized it, a "dog's breakfast" of a marketing plan.  Of course our bias is towards strategy first, and preferably customer strategy at that. 

Bezos committed to a business strategy years ago that put the customers at the center of their operation and, while it's taken some time, their performance speaks for itself.  By his own admission, Amazon is "not a great advertiser".

Lucky for them.  As it's an election year, we like to think of Amazon's strategy as "It's the Customer, Stupid."

Resolution #2:  Connect All the Dots

We see three key elements to any customer marketing plan as more important than ever when times are tough.  With deference to both Dr. Seuss and Jesse Jackson, they are:

1. Integration
2. Calibration
3. Iteration

Integration means aligning as many activities as possible, certainly marketing but also operations and measurement, so that the customer is the focus.  It means not making decisions in a vacuum and likewise, executing a consistent strategy across all areas of a business.

This is another area where Amazon excels, as evidenced by the financial challenge of giving free shipping for orders over $25, but the payoff coming from the customers increasing their average purchase to take advantage of the offer.

Calibration means measuring things so that you can support decisions like free shipping.  Calibration also means testing things before rolling them out so that you can maximize the probability of success.  Clearly Bezos was comfortable rolling out free shipping, and newer services like Prime, because their impacts were measured used to support the decisions.

Last, iteration is important because there isn't usually a straight line.   Things change, both internally and externally.  Customers don't always act the way we think they will, competitors react in a like manner, and sometimes ideas are just wrong or poorly executed.  Flexibility is one of the most underrated strategies in business and one of the most powerful.

Resolution #3:  Remember the Brand

We often cite a mantra that goes "Customers have relationships with brands, not with marketing programs."  It's contradictory for so many focused on loyalty marketing, especially those with pure direct marketing backgrounds.

Especially with companies still spending heavily on brand awareness building activities (i.e., advertising), when desperation presents itself people promote and often in an irresponsible, or at least aggressive way.

There is certainly a time and a place for promotion, but it should be done in character of one's brand.  And loyalty initiatives, connecting brand support and promotion, are no exception.

Ultimately, loyalty is about trust, and this is where Amazon's activities are ultimately brand-relevant.

Resolution #4:  Stop Mass Marketing via Email

Send less email but make it more relevant to both your business and your customers.

Content, storytelling and experience is important.  Quantity is absolutely not quality, especially when people are increasingly connected and opt-in and open rates for email continue their decline.

Further, understand and treat different segments of customers (and especially non-customers) differently.

It was pathetic to see the volume of mass emails "spewing" as the economy softened in Q4 last year and especially Holiday.  Marketers just blasted and blasted away at customers, opting for frequency over relevance.  Based on the results being released, it didn't work.

Open rates and levels of engagement will continue to decline in lieu of irrelevant dialogue and marketers desperately trying to realize sales by increasing the frequency (and telegraphing their desperation) of their email.

Resolution #5:  More Experience, Less Rewards

Loyalty marketing is still too closely connected to Rewards programs.  We are increasingly biased away from Rewards, especially when those "rewards" are things.  People have lots of things and those things have increasingly less meaning and, especially in most loyalty programs, declining in value.

Connecting the experience to any kind of loyalty proposition is increasingly the winning strategy, both for products and services.  And experiences that are brand-centric are not easily matched by competitors yet, done right, can create emotional bonds that transcend the idea of transactional loyalty.

Here's to all the best for you and your business in 2008.

While airlines often lose money in less than stellar economic times, these partner programs generate large profits for the carriers.  This has led to the airlines to consider spinning off their loyalty programs and in some cases even taking them public.  This will be a disaster for the members, as the goals, objectives and strategies of the programs will be increasingly decoupled with the idea of creating customer loyalty. 

Airline miles and hotel frequent guest points will be increasingly devalued.  Miles are barely worth $0.01 each at this point, notwithstanding new capacity controls instituted on reward travel just recently announced.  The combination of fewer award seats and hotel rooms coupled with an increasing supply of miles and points is surely a deflationary combination!

As the airlines all figured out how much money they could make doing partner deals, more and more of their frequent flyer programs ended up with virtually the same partner offerings.  Thus, the partnerships programs have become increasingly undifferentiated and irrelevant to the majority of frequent flyers. 

In one recent example, I recently received the exact same Hyatt offer from two different airlines, Delta and Northwest, who even happen to be alliance and code-share partners!  From Delta, Northwest and Hyatt's perspective, little is gained by blasting out "me-too" offers over and over to the same customers.

As we approach the holidays, there will be numerous, similar emails advocating doing your holiday shopping so as to earn as many miles or points as possible.  While that's a great idea, as every program will be doing it, what's the big deal?

At a minimum, the large travel loyalty programs should challenge themselves to look at partnerships as a tool to help them go beyond selling miles and generating accruals through partner transactions.

What if they figured out how to generate incremental trips via partners? What if they found new partnership categories, providing incentives beyond just another way to earn bonus miles.  What if they created a specific product and/or service related offering?  A tie-in with an innovative new travel company like I'm In?  (For those who don't already know, I'm In is a website that helps you organize group travel with friends.    Kind of like evite but for travel.)

Creating value for customers beyond points and miles can leverage partnership opportunities in a whole new way, not just for airlines but for other industries as well.  Partnership marketing should not only be about bonus miles and points, it should be about creating new touch points, adding tangible, unique benefits (hard and soft), and it should be about sharing insights.  Only with the latter will partnerships become more relevant.

There are limitless opportunities for innovation in partnership marketing...it only takes a willingness look for new partnership opportunities to compete, differentiate themselves, and succeed.

On the positive side, much of the downtown, uptown and French Quarter areas were doing better than in previous trips.  More stores and restaurants were open and there were some signs of life as it was (pre-Katrina).  The vibe from people on the street, particularly those for whom "hospitality" is their business, was more warm and welcoming than ever.  Couple this with an optimistic football outlook (at least for LSU, who for now is #1 in college football) and cooling temperatures and you have the right ingredients for a great year-end and outlook for 2008.

But something was and still is missing.  New Orleans needs more of a hook to get people to visit in the first place and to bring them back. 

The reason is simple:  The place is still suffering from the devastation of Katrina, rampant corruption and crime.  The question of investment, both from the private and public sectors, still hinges on the perceived viability of the area.  That aside, New Orleans still has all the ingredients to turn the corner and be a first-choice domestic (and international) cultural tourism destination.

Meanwhile, there will continue to be a lot of discussion in the coming months, especially in an election year, about how and what to invest in the re-building of NOLA.  There has been talk of making it another Las Vegas and there have been other (better) ideas about how to reposition the city.  At its core, its brand truth, New Orleans has a unique and globally attractive culture like no other.

In order to expand support beyond the locals and die-hard NOLA-lovers (whether from government, organizations, corporations or individuals), NOLA has to do more in terms of building direct relationships with people who visit and can credibly spread a positive, first-hand message about the place.  If there is going to be a sustainable and viable rebuilding effort, the post-Katrina perceptions and realities must be overcome and its image rebuilt. 

While the New Orleans Convention and Visitor's Bureau and others have been investing millions on advertising and PR (and doing some great work), making NOLA more appealing as a place to visit, meet and even live will require first hand advocacy and grass roots support.  This is the only way to make the positioning credible and not just a marketing promise.

So why not start with current visitors?  Like most destinations, and most companies for that matter, New Orleans and Louisiana spend nearly all of their budgets attracting new visitors rather than investing in the hundreds and thousands that arrive each day at Louis Armstrong International Airport.

There is no better way to build a database of prospective visitors, and advocates, than from those already visiting and on the ground there.  There are millions of dollars being spent through organizations like the CVB (New Orleans Convention and Visitor's Bureau), New Orleans Tourism Marketing, and the state department of Culture, Recreation and Tourism.  None of these dollars are being used to build a database and do relationship marketing.

Through a concerted effort by all of the tourism organizations, the private sector and other local organizations, New Orleans can build a sustainable dialogue with many more people by including a more significant focus on current visitors.  These visitors need to be identified, engaged and romanced by their trip so that they leave excited about returning and ready to spread that feeling.

Beyond and included in the visitors are the tens and hundreds of thousands of people like me who are expatriates, still possessing a love for the area.  What an opportunity to build a multi-faceted base of support for the city!  These people can be mobilized not only to visit but to advocate.  And over time, New Orleans can be rebuilt as it should be.

After the training program I was hired on by a suburban Macy's store to run a "better" sportswear business that included the Liz Claiborne department.  At the time Liz Claiborne was among the hottest up-and coming labels in women's wear. 

There are numerous lessons from working at Macy's that are still invaluable today.  Among the most relevant to loyalty and relationship marketing, however, came from running the Liz Claiborne business:  that customers can have intense relationships with brands.

The Liz lines -- Liz Claiborne, LizSport and LizWear -- were much more extensive and included specific named groups or collections within them, each designed to mix and match.  It was Garanimals meets high style, all at an accessible price point that allowed women with modest budgets to build a versatile wardrobe all within a single brand.

Each of the lines were clearly defined, from the collections to the hang tags, which were color-coded by size to make them easy (and quick) to shop.  The hang tags also usually had the name of the particular group on them.

The clothes attracted a loyal customer following.  These customers came into the store more frequently than most other customers, both looking for new collections and for new pieces to add to their existing wardrobe.  They made a beeline for the Liz floor and, while they shopped elsewhere, the majority of their time was spent looking through Liz merchandise.

This made the Liz business a lot of fun to manage, as these customers were very passionate about "Liz" and creating a lasting lesson in the power of brands - especially apparel ones.

Post script questions: 

Why are there not any apparel brands today as engaging as Liz was in this period?  It's not hard to imagine what Liz Claiborne could have done with the relationship marketing tools and capabilities that exist today...

Also, why don't any apparel lines use hang tags as devices to engage customers, get them to visit landing pages and identify themselves?  Apparel designers and manufacturers have the same challenges that so many other brands do in identifying their customers -- the hang tags should be as natural as a promotional offer on a cereal box.

Part of the reason for the busy-ness has been launching new programs.  Several of our clients have launched significant programs since our last post here.  In one case it's an evolution of an existing program and in the other it's a new program launching in test in a category that heretofore has not had any published programs.

Speaking of programs, what Nike+iPod are doing continues to impress me, largely because it's such a well integrated and well executed partnership.

Several noteworthy things have happened since approaching 100 miles.  First, when I hit 100 miles, I received a lovely banner upon connecting my iPod Nano and updating my runs. Note it not only offers to me a printable certificate but there's also a viral element - the opportunity to brag to my friends!

Shortly thereafter, no doubt due to inspiration from Nike and Apple (or is it Apple and Nike), I had a PR (personal record) run.  Apparently I ran my fastest 5 miles since getting the Nike+ setup and at the end of my run Lance Armstrong congratulated me!  Nice touch and very nice way for Nike to leverage its relationship with the greatest cyclist ever.

But wait, there's more.  Now I'm past200 miles, Nike is egging me on to hit 500.  Very smart and done in a very tasteful and, yes, motivational way, nicely reinforcing the training aspect of this offering.

Finally, Nike is working this offering through its indirect retail channel, as evidenced by this email I received from Atlanta's Big Peach Running Company:

It's worth repeating, this partnership and integrated marketing efforts is as good as it gets.

There are countless examples of partnership marketing, ranging from those that are purely promotional (e.g., think “back of cereal box”) to those that are absolutely strategic, like Delta Air Lines and American Express.  Those in the latter category illustrate how crucial fit and execution are in terms of creating a situation where 1+1=3.

It is all too uncommon to see partnerships done to perfection but what Nike and Apple are doing with Nike+ comes as close as to perfect anything.   Here’s my experience, which will probably sound like a script from the Nike+ brand manager!

A few weeks back my old iPod Photo crashed.  After scheduling an appointment and making a visit to the Genius Bar, it was determined (to my disappointment) that it was time for a new iPod.  Ten minutes later I was out of the store with a new 8GB Nano, thinking that the flash memory would hold up better in case I went running with it.

The following weekend I went to my local Fleet Feet running store intent on switching running shoes.  To make a long story short, I tried a new pair of Nike shoes that were highly rated by Runners World.  After a short run in them, the store’s owner mentioned that it comes with an optional chip that will track your time, distance and pace in conjunction with an iPod Nano.  The chip, which fits underneath the insole of the shoe, transmits your running data to the iPod, which can then upload the data to the Nike+ website, via iTunes. 

Sold.

While the term “plug and play” is often overused and an overstatement, it fits here perfectly.  The iPod, chip and transmitter worked perfectly together right out of their respective boxes.  It’s customizable and yet wonderfully easy to use at the same time.

More importantly, this combination is not only satisfying in terms of how it functions, but running with the combination is a new and great experience.  After the first week I was convinced I was running faster and farther, and the proof was easily viewed graphically via the Nike+ website!

So upon uploading my run yesterday, here’s what I’m greeted with:

Stay tuned…

One of the fundamental tenets of direct marketing is that audience selection is the most important driver of response.  So when people talk about and do "data-driven" marketing, they are usually talking about using data to select audiences.

Two recent emails that I received each demonstrate how marketers use data to drive (what they think are) relevant customer communications.  They are both fairly simple in concept and are great examples of how data can be used to drive relevancy and results. 

Staples wanted to promote its Copy and Print Center, but on a specific location basis.  So they sent out the following email:

Whether they were only intending to support the Natick store or they were simply trying to match my record with a specific store, they blew it here.  Assuming I was the right prospect to have a sign or banner made, I don't live anywhere near Natick, have never been to that store and, thus have no purchase record there.

What likely happened is that they had a data error of some sort, which could have been limited to my record or could have affected the whole campaign. 

Now for another example.

Look at how United uses my actual Mileage Plus® balance to show how many miles I'll have once I take their Visa card:

Not only are they making this exactly relevant to me, they are probably varying their offer based on my current balance.  While I might not respond, it's a much more relevant communication for one primary reason:  the email is based on actual purchase activity, as illustrated by my balance.

In each of these cases, you can see that data-driven personalization is not easy to execute, must be thoroughly tested and, when done right, can be very impactful.

As part of our work, we are always espousing the virtue and requirement of linking loyalty strategy to a company's operations.  Last week, when returning from a client meeting (where we coincidentally were working on the operational aspects of a new loyalty program test), there were two completely contrasting illustrations we observed that are each worth sharing

First, the good:  there is no better example of this than Hertz.

Hertz and their #1 Club Gold have made the experience of renting a car as perfect as any consumer experience anywhere.  If you're not familiar with it (and if you travel and rent cars, you absolutely should be), as a #1 ClubGold member you basically walk off your plane, arrive at the Hertz parking lot and look for your name on the #1 Club board, which looks like an electronic leaderboard.  Next to your name is a parking space number, which is where you will find your car ready for you, key in the ignition, ready to depart.  There isn't a need to talk to anyone, wait in line or even pause as you walk by the board.  You simply drive off after showing the guard at the exit gate your paperwork and driver's license.

Particularly in travel, where so many things can and often do go wrong, Hertz has achieved what virtually no other company has done.  It has created an operating structure where the company is highly motivated to link how it operates with an optimal customer experience.  There's nothing cumbersome for the company or the customer, and both are highly motivated to sustain this symbiotic relationship.  Even when you return your car, the name tag on the employees who check you in (while you unload your car) have titles on their name tags that say "Instant Return"!

To put this in perspective, consider the contrasting experience we had at a Crowne Plaza as part of the same trip.  We arrived late after working all day and dinner with our client, still having work to do before our early morning flight back.  As we checked in there was a manager training a new front desk associate, and we asked about what time we would have to leave the hotel to make our 8:15 a.m. flight.  The answer was 6:30 a.m. so we requested a 6 a.m. wake-up call.

Later in my room I noticed a table-tent card promoting the Wake-Up Call Guarantee!  This promotion promised that if they failed to execute their wake-up call then our room would be free.  I had mixed reaction to this:  on one hand I am always skeptical that I would receive the wake up call and risk missing our flight home (of course the flights were sold out that day due to last weekend's Final Four in Atlanta) and on the other hand I expected the staff to be trained to avoid not doing something as fundamental as a wake-up call!  Given that a training manager checked us in and wrote down our wake-up call, I didn't give it another thought.

Of course now you know how the story ends:  no wake up call!  Yes they did comp our room but that doesn't make up for such a mistake!  This is where the beauty of Hertz's operation lies:  their loyalty proposition, #! Club Gold, is a function of how they rent cars and handle returns.  And it is a very sticky proposition.

The idea that loyalty marketing is not a department, an island or a function within a company is all too often overlooked and underappreciated.  Of course, in so many cases such as the Crowne Plaza incident above, it is clearly a struggle. 

This seems so basic:  who, if not the owners of the company, should be more loyal?

Years ago we recommended to an airline client of ours that they say "thank you" to a key customer segment by offering them shares of stock as a token of thanks.  It was a relatively small group of customers and not many shares of stock but it was hugely symbolic.  For a variety of reasons, mostly bureaucratic and legal, the client opted not to do this.

A couple of years ago one hotel company actually built its loyalty rewards proposition solely around issuing shares to its most frequent guests.  While we are not sure how this program performed, the idea of linking customer loyalty and shareholder loyalty is still intriguing.

One company that has long recognized its shareholders as customers is IBM. 

Every year in its Annual Report  IBM includes exclusive offers that allow shareholders to purchase IBM (and now Lenovo) goods at employee prices.  (Of course employees are another key segment of loyal customers but that is a different topic for another day.)

IBM probably generates enough revenue from this promotion to pay for its Annual Report.  Most importantly, they recognize shareholders as loyal customers and give their shareholders another reason to have confidence in their investment.