Best Practices — P&G Mr. Clean Car Wash

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What is it?

You might be aware of the Mr. Clean AutoDry Carwash System.  Well, Mr. Clean Car Wash I am talking about here is not a product.  It is an actual car wash service that P&G opened up in Ohio.  Two locations have been opened so far, one in Mason and the other in Cincinnati.  Besides this innovative brand extension, it has also been reported that P&G is opening up Tide-Y dry cleaners in the Kansas City area.

Why is it a good idea?

(1) Household products are a highly-saturated market.  Branching out from the product market to services opens up a whole new set of opportunities and revenue potentials. As an added bonus, the services area is also highly fragmented competition-wise, unlike the product market.

(2) A physical shop gives P&G an opportunity to put a face to its products. Managed well, this can lead to more intimate and meaningful customer relationships.

(3) The shops can serve the function of advertising and publicity for the physical product/brand.

(4) Having first-experience with people’s carwashing and dry-cleaning behavior can give P&G valuable market research information.

Small Print

Sometimes an idea is so pioneering and unusual that it naturally comes with some risks. For P&G, the biggest risk is in its ability to execute these service shops well.  Being a consumer packaged goods company, it is not exactly an expert on services marketing and service logistics.  If not done right, bad customer experience from the physical shops can have a damaging effect on the core brand.  I suspect this is partially the reason why P&G has been very cautious in this area, so far keeping a very low key, only experimenting with the idea in selected local areas and possibly rolling out nationally if the experiments prove successful.

Second Life Demographics Update

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My previous blog “Rethinking Second Life Demographics” has attracted quite some search engine traffic from people who are looking for Second Life user demographics.  Since the original demographic information that I linked to was a little old, I would like to point my readers to a newer and more authoritative demographic information source: Linden Lab itself.  If you visit this Linden Lab’s Economic Statistics page, on the right side of the page, there is a link that allows you to download key metrics in an Excel (among other) format. The Excel file contains a worksheet called “Demographics” that provides information on SL users’ country of origin and usage hours by age and gender.

To give you a flavor of what is included there, here are some sample pieces of information provided by the latest (July 2008) key metrics:

1. Top 10 Countries by active user hours: US, Germany, UK, Japan, France, Brazil, Canada, Netherlands, Italy, and Spain.

2. Ranking of age segments by % of active hours logged: 25-34, 35-44, 45+, 18-24, and 13-17.

3. Males logged more active hours than females by an approximate ratio of 60/40.

The same Excel file also provides information on key SL economics, such as SL land ownership, business transactions, and LindenX currency exchange activities.

Loyalty Program Saturation (or Not)

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With the current downturn in US economy, many companies are adding loyalty programs to their marketing toolbox, both as a customer relationship management tool and to demonstrate better value to existing and potential customers.  In some industries such as travel and financial services, numerous rival loyalty programs are offered, creating intense competition among these programs. This pervasiveness of loyalty programs has led some to conclude that such programs may be a necessary cost of doing business or argue that memberships in multiple loyalty programs may eventually cancel out the effects of each individual program, creating a zero-sum game. With a large number of competing loyalty programs, are firms merely giving away profits in a desperate struggle to win business, much like the airline price war in the early 1990’s?  Or are loyalty programs a viable strategy that can increase revenue potentials, even with competitive offerings in the same market?

These are the questions my co-author and I intended to answer with our forthcoming article in the Journal of Marketing entitled “Competing Loyalty Programs: Impact of Market Saturation, Market Share, and Category Expandability“.  Using 30 years of historical data from the airline industry supplemented by consumer survey data, we found that an airline’s frequent flyer program does not always lead to beneficial outcomes for the offering firm and that only high-share airlines experience sales lifts from their loyalty programs. As high-share firms tend to possess complementary product and customer resources, they are more likely to gain from their loyalty programs than firms with a smaller market share.

Our research also reveals that crowding the marketplace with loyalty programs can diminish the return of an individual program. However, this saturation effect is contingent on the expandability of the product category. When the products from one industry can be extended to meet the demands in related industries, the competitive landscape shifts to include not only competitors within an industry (i.e., other airlines) but also firms in those related industries (i.e., other modes of transportation). Looking from this broader perspective, the imitation of loyalty programs among direct competitors can still derive competitive advantage within the broader market if competitors in alternative categories do not yet possess such resources. Under this situation, saturation becomes less of a threat to the success of each individual program in the focal industry. For the airline industry, due to its relatively high category expandability, the overall effect of market saturation becomes insignificant.

The findings from this research caution against an urge to launch a loyalty program simply because every other competitor is doing so. Rather, a firm who is pondering the launch of such a program in an already saturated market should carefully take into consideration the flexibility of market demand and whether importance resources (e.g., products, customers, data analytic capabilities) exist to complement such a program.

For further readings, you are encouraged to download a preview copy of the loyalty program competition paper from my website, or from the Journal of Marketing website.