A successful B-to-B loyalty program that’s not about points and rewards
In the high-end networked copier business, Canon USA enjoys market share leadership across the board. At the same time, the document and imaging industry has been flat over the past several years, and a shakeout is in full swing-witness the recent merger of Konica and Minolta, and Kyocera’s takeover of Mita. So Canon is extremely conscious of the need to grow and to maintain its lead.
The category itself has changed in recent years, as imaging workflows become more sophisticated and the products increase in complexity. The industry’s new problem is customer confusion. Workflow management now involves both the traditional end-users and office managers, but also the IT departments who are needed to establish the connectivity that makes these multi-function machines most productive.
So in 2000, Canon Imaging Systems Group’s senior vice president of marketing, sales and administration, Tod Pike, decided to launch an initiative to 1) maintain the loyalty of current customers, and 2) reinforce the decisions customers have made to install and use Canon equipment.
Pike named David Hughes, an experienced database marketer, to head the project. Hughes quickly recognized that his challenges would lie in two areas. First, he needed the cooperation of Canon’s distribution channel, all independent resellers, who considered themselves the “owners” of the end-user relationship. Second, he had to build, from scratch, a data warehouse fed by legacy operating systems and miscellaneous data sources on spreadsheets, in order to create-for the first time at Canon-a single record on end-user customers.
As Hughes considered how best to create a loyalty program, he concluded that the right program structure in this situation would not be about traditional points and rewards. He felt that rewards programs are expensive, too easy to copy, and difficult to suspend. Even more important, they tend to commoditize the brand and divert customer attention from the brand value to the program itself.
Instead, Hughes created a program that addressed each customer’s business environment, educating customers on the best products for their situations and identifying any problems or areas of dissatisfaction they might have.
The program consists of a series of outbound messages, through newsletters, solo mail, and email, sent at least quarterly, and-in cases like large accounts with high-end equipment-as often as once a month. Each message is customized to the needs of the individual contact, with 20 different variable message elements, based on the contact’s role in the buying process, the industry, and the Canon products installed.
Each communication asks for some kind of response, whether to update the customer profile, or ask questions, participate in a survey, or identify a problem. “This gets us into a fairly delicate area,” comments Hughes. “We are walking a fine line when we ask customers for feedback about any points of dissatisfaction. We want to identify problem areas, notify the reseller, and get it resolved-without appearing to be Big Brother monitoring dealer performance.”
In the two years since the program’s inception, Canon has experienced measurable improvements in both its interactions with end-users and its relationship with the dealer channel. “Before this program,” says Hughes, “there was no system for inviting customers to provide input on their experience with our products. We have observed a significant increase in satisfaction levels, driven by our new ability to identify problems early and send in the reseller for follow-up. We then re-survey the customer, and we are finding gratifyingly strong increases in customer satisfaction and willingness to refer.”
Canon has also seen dramatic improvements in its ability to partner with its resellers. “Of course, there was a certain amount of panic when we began talking with the dealers during the program planning phase,” says Hughes. “They were afraid our intent was to interfere with their control of the customer relationship.” Hughes was able to persuade a number of progressive dealers to join the program, based on the clear protocols, business rules and data security measures he had developed. Since then, the participating dealers are so pleased with the message streams-which appear to come from them, co-branded with Canon-that numerous other dealers have signed up for the program.
Canon is measuring the program results along three dimensions,
- specific metrics of program performance, such as satisfaction rates and response rates (some have been as high as 8%)
- the credibility and relevance of the communications, as measured by surveys and focus groups;
- actionable improvements in data hygiene, such as the growth and accuracy of the information about customers in various segments. This last metric has provided Hughes with some major bragging rights. He tested the value of data hygiene by splitting a file, cleansing only half, and sending the same communication to both halves. The cleaned-up names responded 8 times better, and the dirty names resulted in 20 times more undeliverable “nixies.” “With that experiment,” says Hughes, “I’ve been able to demonstrate that our program is saving Canon hundreds of thousands of dollars in wasted communications by eliminating bad records.”
When asked what he would do differently, Hughes chuckles. “In my entire career, this is one program that has gone relatively easily. The only thing I might change is the speed with which I brought in the resellers. Their bark turned out larger than their bite. I should have been out selling the program to them earlier in the process. They are so satisfied with the program now. Canon’s relationship with its resellers has improved by leaps and bounds.”
Hughes concludes: “The key to this program’s success is its education of our installed base about getting the most from their Canon products, and its ability to ferret out problems and get them fixed. This is what generates loyalty, repeat purchase and positive word of mouth.”