For those who use EndNote to compile their bibliographies, I would like to share something I recently learned. When I was trying to compile a list of references in my Word document using the “J Marketing” style, I encountered an error message: “Service Error: Generic”. After troubleshooting for a while to no avail, I finally stumbled across the cause of the error: a report-type reference in my database. When I changed the record type, it no longer caused error. I tried the same report-type reference with other styles and did not encounter any problem. It appears that this generic service error caused by report-type references is specific to the J Marketing style. For a quick workaround, I recommend simply naming your record type to something other than a report, such as a book. As an additional note, this same error does not apply to the Mac version of EndNote.
Loyalty Program Long-Term Effects
Although we see loyalty programs everywhere, there is limited evidence on the long-term effects of such programs, and their effectiveness is not well established. In my paper to be published by the Journal of Marketing, I examined the long-term impact of a loyalty program on consumers’ usage levels and their exclusive loyalty to the firm. Using longitudinal data from a convenience store franchise, the study shows that consumers who were heavy buyers at the beginning of a loyalty program were most likely to claim their qualified rewards and thus benefited the most from the program, but their spending levels did not increase over time. In contrast, consumers whose initial patronage levels were low or moderate gradually purchased more and became more loyal to the firm. The most visible change for these two segments occurred within three months of joining the program, and the growth continued at a steady but slower pace in the following months. At the end of the analysis period, these consumers’ average purchase frequencies were not statistically different from that of an adjacent tier. This supports the argument that loyalty programs can accelerate consumers’ loyalty lifecycle and make them more profitable customers.
The diverse responses across consumers suggest a need to consider consumer idiosyncrasies when assessing the impact of loyalty programs. Loyalty programs by nature are one-to-one programs. How much a consumer can benefit from such a program depends on his or her “investment” in the relationship with the firm. One surprising finding from this research is that consumers who started with low usage levels changed their behavior as much as or more than moderate and heavy buyers. This contradicts the commonly held belief that light buyers are less than ideal targets for loyalty programs and that they will not perceive much value in the program. In the current case, the loyalty program did not initially appear very attractive to light buyers. But these consumers diversified their purchases and branched into the firm’s other service areas. Over the course of two years, light and moderate customers enrolled in the loyalty program increased their value contribution and accelerated their relationship lifecycle with the firm, turning the program into much more than a passive loss-prevention instrument. These findings challenge the traditional wisdom of loyalty program as primarily a defense mechanism used to keep a core group of best customers from defecting, and suggest a need for managers to expand their mentality toward loyalty programs beyond mere reactive tactics.
This paper will be published by the October 2007 issue of Journal of Marketing. To download a preview copy of this paper, please visit my publications page.
Best Practice — American Express Members Project
Last month, American Express launched a new marketing campaign called “The Members Project”. On the Members Project website, American Express card holders can register and create or vote on projects that intend to have a positive impact on the world. Project proposals cover a wide range of areas, from arts, education, to environmental and wildlife protection. These projects will go through a few rounds of voting and selection both by the project advisory committee and the members of the website, and the winning project will be announced on August 7. American Express will contribute $1 for each card holder that registers on the website, up to $5 million, which will be used to fun the winning project.
I think this is a great campaign for a few reasons:
- It draws on the collective power of consumers and utilizes the increasingly collaborative nature of the Internet. While American Express is not the first one to do this, most of the influential viral marketing campaigns on the Internet so far either used corky humor (e.g., CareerBuilder’s Monk-e-Mail) or had a distinctively underground feel (e.g., Burger King’s Subservient Chicken site). The goals have often been to capture the younger generation’s attention. In contrast, the Membership Project stands out as a more “mainstream” campaign that resonates with everyday Internet users.
- The campaign is a great integration between advertising and public relations. The positive causes promoted through the campaign are likely to receive media attention, and it conveys a very positive image for American Express. By involving consumers in this process, the campaign seems more natural and less commercial-like.
- By building the campaign as a members’ project, American Express builds affinity of its card holders as a group and makes them proud of being part of something positive. This fosters the feeling that being associated with American Express really means something.
Since Mastercard’s successful “Priceless” campaign, I have not been very impressed with major credit card issuers’ marketing campaigns. Visa’s “Life Takes Visa” came across as being too similar to the “Priceless” idea, both to me and to my students from the sentiment reflected in classroom discussions. The Members Project has the potential of being another great case study of effective marketing campaigns. Judging by the number of projects submitted on the Members Project website, 3634 when I last checked, the campaign is already well on its way to success.