Monday, February 28, 2005

Loyalty Marketing: Sister Hummel's Epistle

Goebel, makers of “Hummel” porcelain figurines, those tschachkes that everyone’s Grandmother has and cherishes, is celebrating the 25th anniversary of it’s collectors club, the oldest in the USA or so they claim. Club marketing, the poor man’s CRM, has had both a remarkable impact on the brands using it and a remarkable history of experimentation.

With 250,000 members in the United States the collectors’ club accounts for a huge percentage of recurring sales, which Goebel counts on as baseline revenue each year. At retail prices ranging between $100-$350, club members generally buy 3-4 units per year and can be generally counted on to buy another “club exclusive” not available to the public and refer at least one new lead annually. All in all, the club is a dynamic element in the Goebel marketing mix, which provides sales volume, customer feedback, marketplace intelligence and brand direction at a minimal cost-per-sale.

Rooted in the twin premises that … an enhanced brand experience nets a higher lifetime customer value and … that it’s easier to sell existing customers more stuff than create new customers, club marketing seems like a no-brainer. All you have to do is sign up your best buyers, give them an occasional deal, send them a newsletter and … presto … you have guaranteed sales of hundreds of thousands of units each year. If only it was this easy.

And while everybody from professional sports teams to consumer products companies to car manufacturers have embraced affinity or loyalty marketing, very few have got it right and gotten it to pay off either in terms of units sold or brand loyalty.

Consider these variables, and lessons learned from the adherents of Sister Maria Innocentia Hummel’s cult.

1. Own The Customer Relationship.

You can’t relate to customers if you aren’t prepared to respond to their needs. In many business categories the manufacturers of the brand distribute products through retailers. Each claims ownership of the customer relationship. Sometimes their interests coincide. Sometimes they don’t. Too often, in spite of intramural wrangling, neither makes much of an effort to add value, communicate with or interact with end users. But if you expect to build a brand, the brand has to own a relationship with its heaviest users. To concede away this link is to place your fate in the hands of others. It’s a recipe for disappointment leading to disaster.

Yet, if you own the relationship, you must answer the phone, mail, fax and e-mail, provide credible customer service and be ready, willing and able to engage customers’ concerns, questions and needs. It requires a substantial investment of time, attention, people and capital. It can be very annoying. The investment requirement often gets retailers and manufacturers at each other’s throats since retailers prefer to control the interaction and have manufacturers cover their costs or pay them for services rendered.

Relative brand loyalty also plays a factor. Some of the Goebel club members exclusively collect Hummels. Others collect all manner of dust-collectors from any number of competitors. A decision to own the relationship often is the by-product of an estimate of the potential ROI. Yet in a world of weary middlemen fearful of disintermediation, whomever controls the brand needs to connect with primary customers.

Another important aspect in deciding to own the relationship is the nature of loyal customers. Often, they don’t match marketers’ conceptions about who their best customers are or ought to be. It can be sobering to realize that your best customers are lower middle class, Middle American, blue-haired women, most likely of German-American extraction concentrated in second tier cities and small towns wearing stretch pants and driving 5 year old mini-vans.

It can also be upsetting when their love of the brand does not coincide with the immediate marketing agenda, the new brand identity guidelines or the new product line. Nonetheless they drive your volume. Brand stewards need to overtly or covertly own the relationship and influence the direction of marketing-oriented clubs. To do otherwise is to lose control of powerful brand advocates.

2. Use The Club Aggressively

Club members are totally into your brand. So don’t be bashful about asking them questions, profiling them and seeking their advice. When it comes to interacting with your brand, club members have very few privacy concerns. On the contrary, they want you to know them and schmear them.

Too many marketers prefer either to dictate or guess at what their best customers want or will respond to. A club offers a test bed, a ready-made research panel and a practical compass for campaigns and product development. These are people eager to help, even if they ask too many questions, constantly demand freebies and have all kinds of wacky ideas. You can’t afford to ignore your best customers, but you may need to filter their enthusiastic input.

The same energy that attracts club members can also be harnessed to drive marketing initiatives. Ask club members for referrals. Allow them to earn discounts for referring new members or purchasing selected products. Give them a heads-up on new products and new campaigns to guarantee baseline street credibility or advance word-of-mouth. If their impact on your brand is significant, customize creative messaging for them.

3. Offer Real Value

The Hummel Club offers it’s members … a free gift on joining and with each annual renewal, an exclusive series of products, unique annual Christmas plates, bells and angels, a quarterly newsletter, an annual behind-the-scenes trip to the factory in Bavaria, an annual convention and opportunities to meet visiting artisans during their publicity sweeps through the US.

This array of offerings is not philanthropy. Every club activity yields a profit to Goebel. Each has been requested by and tested with club members, who since 1981 have formed themselves into 70 local chapters in the US alone. Each component was added incrementally and each required the brand to balance practical growth objectives with the idiosyncratic needs of club members.

The allure of club marketing, especially to members, is insider knowledge and access.
Serving this primary motivator is the key to effective club marketing strategies. Don’t ignore the greed factor either. Many Hummel collectors calculate and obsess about the value of their pieces on the secondary market. If you doubt me, check Hummels on eBay.

Here product knowledge and nuances can affect secondary prices and the value of larger collections. Club members want to know every detail about artists, production, painting, back stamps, issue dates, etc. since the details often determine the difference between very valuable figurines and also-rans. The same is true in many product categories.

Club marketing requires recognition and aggressive management of a community of people and interests coalesced around a brand. These interests are not necessarily aligned and are often in conflict. The marketing challenge lies in sorting them out and harnessing them to drive brand recognition, growth and direction. Meeting the challenge can sustain and enrich your brand.

Consider the Goebel example. Cutesy figurines of Bavarian children in everyday activities made by a tubercular nun in the 1920s and 1930s and realized in glazed porcelain … a momentary fad, which should have died out when the GIs returned from occupying Germany after the Second World War, is still wildly popular. Sixty years later almost a quarter of a million Americans spend $1000 religiously each year to collect new figurines, talk about them, swap them and interact with others who do. It’s not only the legacy and artistry of Sister Hummel. It’s smart loyalty marketing.

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