Over the years working with Loyalty programs with so many companies in the Retail sector, I feel I can summarize some observations:

• True customer loyalty is created when the customer becomes an advocate for the organization
• Rewards alone don’t generate loyalty. If a loyalty marketing program is just about earning points you end up buying loyalty not earning it.  The loyalty      is to the program not the product or the company.
• Rewards-only programs can be easily replicated by the competition, will quickly be commoditized and become a defensive play that no competitor can afford to unwind.
• Loyalty can be attained, but the organization has to work at it, continuously, and it will not possible with all customers.
• These is NO One-Size Fits-All Loyalty Program
• A win-win relationship must be established, and this cannot be accomplished if both parties cannot realize benefit. The two poles must be attracted to each other.

1. Compelling Value Proposition

• That which provides the customer with a tangible benefit if he or she decides to join a benefit program.
• Leading organizations adapt the value proposition for different segments of clients.

 2.     Satisfaction

• Customer satisfaction is the degree to which customer feel their needs are met.
• Short-term perspective, very much based on the transaction with the customer.

 3.     Loyalty

• It is a feeling of connection to, and belief in and enterprise and its proposition, created by a “feel good” factor from interaction that lead to continued relationships.
• Loyalty is ultimately the crucial measure and it is more difficult to achieve than satisfaction.
• A customer can be dissatisfied despite being loyal.
• Loyalty can only be created on the basis of trust and repetitive positive experiences over time.

 4.     Advocacy

• The pinnacle of customer loyalty is where the      customer acts as an advocate for the enterprise.

In the last years, many banks talked a lot about the importance of customer knowledge but only few of them have put successful actions behind their words. Companies still struggle with the basics of revenue growth areas:

• Customer Segmentation: Who are my customers, and how do they differ?
• Differentiated Treatment: How should I treat each customer segment?
• Optimization: How can I optimize treatment decisions to maximize value at an individual level?

The ability to classify or cluster customers / prospects based on certain business rules or inherent customer data behavior, pattern using advanced statistical modeling tools and techniques.  To effectively use the gold mine of customer information, banks must develop at the same time the capabilities to aggregate, analyze, and use the customer data. And the best way to develop these capabilities is to create a specific unit at Headquarter level / enterprise level. Let’s call this unit “Marketing Factory”.

• The first is create an integrated view of each customer: marketing analytics achieves this goal developing superior data management capabilities
• The second goal is understand and predict customer behaviours: marketing analytics achieves this goal
  • Developing propensity score
  • Realizing segmentation and profiling analysis
  • Realizing analysis of customer profitability and long term potential value
  • Developing analysis on customer satisfaction and loyalty
  • Develop marketing and sales dashboard
• The third goal is to provide insights that directly improve sales effectiveness. Marketing analytics achieve this goals:
  • Identifying relevant commercial events and related offer
  • Defining next product to offer for each customer
  • Identifying the most profitable combination of customer segment/channel/product thanks to optimization tools

Today I was chatting with the global CIO of a fortune 100 company and just discussing how the alignment of his initiatives was going. He had some interesting analogies of how the business conducts the IT aspects of its business. He said, “If you run a small business and you buy MS Excel, it doesn’t mean that you can manage cash flow better. Accounting is has a process to it, a language, etc. that is key to understand before you do things on XLS.” He added, “Its like my daughter buying an expensive digital camera – doesn’t mean the pictures will be better. You need to understand the basics of field of depth, lighting, speed, apertures, before you can leverage that tool to your advantage”.

The debate between TOOLS vs PROCESS and what is more important happens at every strategic meeting and decision making juncture. The third leg of the stool – PEOPLE – is always assumed present or can be brought in easily.

Processes and tools go hand in hand, so the question again is which one comes first though- the chicken or the egg conundrum. It all depends on the industry you are playing in, the position you are in and so most importantly which CAPABILITIES you need.  Technology is ever evolving, and with tools resulting from technology, one can argue that tools must lead the way for the activities we perform. But a good product, for example, has a limited life span in the marketplace. A good product development process, however, enables a company to create appealing new products over and over again. The alignment of processes and tools, is about Efficiency - it is all about HOW the organization should be doing what it decides to take on. For this companies need to think in 3 dimensions:

• Differentiation “on the outside”—They need to have a clear view of what makes them unique—product, sales, service, brand, or business model. They need to deliver a consistently positive experience for customers in each market segment.
• Simplification “on the inside”—They need simplicity in everything they do and this means standardized or componentized internal products, processes, and systems, with scalable and repeatable business models across the enterprise.
• Execution mastery—They need to prioritize execution as a core capability with the right leadership skills, culture, and change and risk management.

Another splurge on the media in the New Year is the deluge of ads for health and weight loss. They know the new year’s resolution is the time to close new members into gyms, diet courses, equipment sales, etc. But in this day and age of health options and the onslaught of mobile technology, it’s amazing to see how this industry is evolving. The interactions with people and patients is going from “episodic” to “continuous” with the advent of this technology:

• SIMpill: Smart pillbox to monitors medication and communicate with doctors
• Proteus Pill: Ingestible sensor which sends digital signal to on-body receiver
• Asthma Assistant: A 6-month pilot study of children and teens with severe persistent asthma found that the technology-enabled daily communication helped patients to better manage their conditions. Over the study period, patient adherence was high and there were no emergency department (ED) visits among the study population, compared to a national average of 2-3 annual visits among asthma patients. This technology enables data collection by the patient and then on a as needed basis monitoring by the medical team and provide feedback based on medical algorithms.
• Diabetes Assistant: LG Glucophone is already in use in S. Korea – this works alongside Infobia’s Eocene diabetic management system to ease the task of blood glucose management. The results of the blood tests will be sent to a secure server that graphs and manages the disease, sets up automatic texts of results and creates reminder alarms.
• Texting for health: Available at http://www.texting4health.org/page5/page5.html. Nearly three-quarters of the people in the US have cellphones. SMS can be used to remind patients about their medications and also deliver info and encouragement to help patients manage their health.
  • In 2006, the drug maker PediaMed launched a mobile compliance campaign called 8TDAZE involving a prescription acne treatment called TAZORAC. – remind teenagers to apply the treatment regularly.
  • Text4baby is a free mobile information service designed to promote healthy birth outcomes and to reduce infant mortality among underserved populations.
• Mobile Imaging: http://www.sciencedaily.com/releases/2008/04/080429204303.htm
  • Nearly three quarters of the world population don’t have access to essential medical imaging technologies (ultrasound, MRI, etc.). UCB researchers are creating portable medical imaging using mobile phones (data acquisition + display; remote computer for processing). The data acquisition device can be made with off-the-shelf parts that somebody with basic technical training can operate. As for cell phones, you could be out in the middle of a remote village and still have cell phone access. 
• Diagnosis:
  • Symptom Navigator: Use the Symptom Navigator to figure out what you’re suffering from.
  • iEyeExam: With this app, you can give yourself a quick eye exam.

With 85% of physicians using smartphones, there are many areas that mobile solutions will get into on the provider side too:

• Schedule and scheduling management
• Clinical record management
• Patient accounts management
• Accounts receivable management
• Electronic insurance billing
• Insurance claims management
• Online patient registration and communication

With the holidays around the corner, everywhere you go, you get stuck in traffic especially if you are near a mall these days. The online and offline activity this season determines the economic flavor for at least a quarter or so. The retail industry anyway is pretty broad in that the value chains work differently for different consumer products and goods. But there are certain trends that are common:

• “Retailization” is spreading as businesses across all industries vie for closer customer connections
• Retail channels are continuing to blur and expand, generating new expectations from consumers and more cross-channel challenges for retailers
• Shoppers are continuing to gravitate toward products and experiences that offer individual focus, interaction, customization, and cradle-to-grave offerings
• Demand for online capabilities (and for a consistent experience) is increasing
• Demographic shifts in spending power are driving retailers to rethink go-to-market strategies

In these scenarios, when you begin analyzing the individual company needs, it is clear that winners will survive and gain market share by doing three things right:

• Identify target customer by each purchase of target items
• Identify measured value and reference value for daily average contribution profit separately for purchaser and non-purchaser groups, and variance of both values is identified as effect.
• Convert to effect of entire profit increase

The winners in retail spend less money but target the customers more scientifically and execute their investments more swiftly. To understand this, it is important to lay out the details of the value chain of the company. Finance, IT, human resources, and GNFR combine to manage the business, which consists of demand generation and demand fulfillment through various channels.

The retailers have to connect with its customers, whenever they want, however they want, seamlessly.

Web:

• Product available for order on-line and collect in store or local delivery
• Relationship with amazon.jp and other partners for non-stocked items

Shops:

• 24 hour operations
• Staffed to hourly profiles

Mobile:

• Loyalty support
• Ordering capability
• E-Payment through phone
• Supervisor (B2E) enablement

Loyalty across channels:

• Extensive network of partners with shared, integrated loyalty program
• Customer (history) identifiable in all channels
• Customer call centers should be effective and efficient

They need to have product centric operations, focused on “Right Product, Right Place, Right Time, Right Price”. Forecasting has to be driven by macro-factors as well as local conditions:

It is widely understood that if a person eats right and exercises then he or she can lose a desired amount of redundant weight and be healthy. But in many cases if the person returns to the same habits of unhealthy eating and lack of exercise then the unwanted weight will return. A recent study by researchers at the University of Missouri (as described by the website Science Daily) takes it a step further. What they found is that even with regular physical exercise, people who are otherwise sedentary are at higher risk for chronic diseases such as diabetes, obesity, and liver disease. They found that it is not enough to exercise regularly if a person otherwise sits in one place for most of the day.

Likewise, keeping IT operations healthy requires more than occasional bursts of helpful activity to rationalize and standardize. For many companies, a majority of IS and IT budgets are allocated to application maintenance and support, often up to 85%.  Not only does this decrease profitability but it reduces available capital for discretionary spending and strategic initiatives.

Several major factors have contributed to an increased focus on simplifying the application portfolio through rationalization and improved portfolio management including: 

• Many years of distributed IS/IT spending and investment within specific functions and/or organization boundaries (no enterprise-wide investment management process)
• Increased cost pressure and desire to improve the synergy of IS/IT investments across organization boundaries (eliminate redundant vendor/technology investments, consolidate IT assets)
• Growing need to integrate infrastructure and enterprise solutions across external customers, suppliers and partners
• Significant merger/integration activity to achieve economies of scale and remain competitive
• Growing demands from the business to increase the strategic utilization of information technology and produce greater impact from the existing levels of IS/IT investment

Unless applications are appropriately managed, the entire IT budget becomes operations and maintenance.

Rationalization is an ongoing activity to be re-examined as part of a regular exercise like annual planning.  Business–IT alignment and integration require that both parties take stock of the current situation, consider in what ways they wish to improve, and then determine how to get there. There are different “physics” that get the firm to this hairball of applications and infrastructure—governance and funding mechanisms, organization structure, changes in capabilities, leadership gaps, etc.

Some key characteristics of potential companies needing this:

•  Cloned Systems
•  Shadow Spending
•  Past M&A Activity
•  Lacks budget for initiatives
•  Stove-Piped Investment
•  High Maintenance budget

The Solution

• Application Rationalization is a systematic approach to improving the business performance of IT application portfolios by reducing current system complexity and by aligning application direction to the priorities of the business. The primary objectives of an application rationalization effort include:
  • Improve the overall investment mix available to fund strategic new initiatives
  • Reduce complexity of the application and resulting infrastructure environment to improve ability to integrate business capability across internal and external parties
  • Reduce cycle time for new initiatives by eliminating unnecessary application/system complexity

Application rationalization is most successful when completed in conjunction with an effort to change the leadership, processes and organization disciplines that manage and control IS/IT spending.  Most companies have separate efforts underway evaluating the IS/IT operating model and governance direction.  These efforts are complementary to application rationalization activities, and should be pursued in parallel to the application rationalization activities. Application Rationalization drives value for our clients across business, Information Systems (IS) and Infrastructure (IT) areas:

Business Value Levers

• Decrease business process cost
• Improve asset utilization
• Better decisions with shared information
• Improve people and skill mobility
• Improved agility in acquisitions

IS Value Levers (Apps)

• Decrease application development and maintenance cost
• Decrease interface and integration costs
• Decrease conversion cost of new efforts
• Consolidate and reduce software licenses

IT Value Levers

• Consolidate servers and server support
• Consolidate and reduce storage costs
• Decrease system software licenses
• Simplify and enhance development tools and development environment
• Reduce Operations Support Costs

Application rationalization initiatives should be treated like a program—they require the proper attention, training, budget, communication, staffing and skills, and partners. The application renewal strategies need to be grouped into logical programs. The team needs to identify organizational and process impacts and create near-term and long-term roadmaps. Like any other initiative, the team needs to identify a benefits realization method so that the business case progress can be manage

No matter how much people say we are completely digital, there is a still a demographic that prints and uses paper. Surely electronic media continue to reduce paper demand and specially world demand for graphic papers is decelerating. But paper is all around us. “Forest Products” which refers to goods manufactured from the forest (trees) includes everyday products like lumber, pulp, paper, and packaging.  Products include common items such as paper, lumber, corrugated packaging and facial tissue. The North America forest products sector is inching toward a gradual recovery in 2011, with a slowing recovery from 2012-2017. The key emerging markets for forest products are Asia, notably China, Latin America, and Russia.

Forest Products generally fall into five distinct categories. 

1. Wood Products includes building materials like lumber, plywood and particleboard. 
2. Tissue includes paper, bathroom tissue and facial tissue.  This segment will sometimes include technically complex, specialty items like baby diapers. 
3. The paperboard segment includes products like corrugated and pharmaceutical boxes.
4. The Market Pulp segment is a business-to-business segment and is not an end use form.  Market pulp is fluff or baled in form and is sold by companies to other forest products companies who in turn convert the pulp into paper, tissue, paperboard or some other product. 
5. The Paper segment is fairly diverse and covers a range of items such as newspapers, paper grocery sacks, magazines and catalogs.

The forest products value chain is relatively straightforward, although individual process steps can be technically complex.

• First, logs are harvested from a forest.  Increasingly, large forest products companies are divesting themselves of their land holdings and outsourcing the harvesting function.  The big drivers of divestment have been interest in timber holdings by the alternative investment community and the desire of forest products companies to unlock captive balance sheet value.
• The logs are then transported to a saw or pulp mill.
  • In the saw mill, logs may be scanned to optimize yield before processing.  After unloading from a truck or train, the logs go through the sawmill and are cut into various forms of lumber and veneer. 
  • In the pulp mill, the logs are unloaded and then may be cut into smaller sizes before being chipped.  The wood chips are conveyed from the chip pile, screened and sent to a digester along with chemicals.  The chips and chemicals cook for a set amount of time, are released into a blow tank that separates the fibers, and then are sent to washing and possibly bleaching. A pulp-chemical slurry is formed in stock prep and piped to the paper machine, where it is formed on the wire.  The formed sheet then goes through several sections which remove water and then is wound on the dry end of the machine into a large roll called a jumbo roll, which can way many tons. The jumbo roll is typically immediately slit into smaller, easier to manage rolls of paper.
• Conversion is an all-inclusive term for operations occurring after the paper mill.  Conversion can refer to sheeting, which is the process of turning web rolls into sheeted product.  It can refer to the manufacturing of corrugated products.  It can refer to the manufacturing of laminate.
• Finished products are distributed to customers via truck, rail, and ship.
• The final step in the value chain is recycling.  Recycled materials are sorted and reintroduced to the pulp mill.

Forest Products Megatrends are that Biomass energy is key. As all industries set goals for the use of renewable energy, forest products, as a trendsetter in this area, will be held to higher standards for renewable energy use.  Partnerships inside and outside of the industry will be necessary to further advance in this area. Another key area is Capital Spending. In an effort to protect liquidity, companies are cutting back on capital spending.  Expansion projects, especially those outside of the emerging markets, will be few and far between. 

Due to the ability to flex manufacturing capabilities and the global presence of major firms, the forest products industry tends to be fairly fragmented when compared to other commodity industries that have gone through major consolidation like oil and steel.

An important aspect of the forest products industry is the focus on sustainability.  An outgrowth of this has been the development of certification programs, which validate or verify topics like wood source, harvesting practices, and product recycled content.  There are three major certification programs currently competing in the industry:  Sustainable Forestry Initiative, Program for the Endorsement of Forest Certification, and Forest Stewardship Council.  Certified forest products could serve as an important source of competitive advantage in the future.

Although players currently tend to concentrate in a segment of the industry, many can and do manufacture alternative products.  For example, a coated paper manufacturer like Stora Enso or NewPage will likely have the flexibility to produce coated or uncoated paper of varying thickness or weights from hardwoods and softwoods. 

Over time, there has been an oscillation between pure play in the segment and vertical and horizontal integration. International Paper is a good illustration.  At the companies integration peak in the 1990’s, International Paper owned millions of acres of timberland, operated a chemicals division, and manufactured products that included kraft paper, printing and writing papers, boxboard, wood products, high and low pressure laminates, and oriented strand board among others.  International Paper has divested most assets except those directly related to the manufacturing of paper and packaging.  Generally speaking, forest products companies have found difficulty extracting the perceived value that integration would bring.

<<Please PRINT this blog for the paper industry>>

The changes that come across our daily lives are centered around 4 major components: shoppers, technology, society in general, and environment that we live in.

The Changing Shopper - Over the next 10 years, demand for better and highly personalized service is bound to go up as a result of consumers rapidly embracing newer technology. Concerns on sustainability as well as that on consumer health & well-being will also find more prominence in the interactions that an organization has with its consumers

• Global demand for organic products continues to grow, with sales increasing by over $5 billion a year, according to The World of Organic Agriculture: Statistics & Emerging Trends
• According to the Natural Marketing Institute (NMI), the American Lifestyles of Health and Sustainability (LOHAS) industry  is currently valued at US$209 billion, and estimated to comprise approximately 19% of the adult population in the United States, equaling a market of 41 million consumers
• According to a report published by the Waste & Resources Action Program (WRAP), total food waste in the supply chain amounts to 11.3 million tones and total packaging waste to 5.1 million tones.
• Consumers are increasingly leveraging technology (web 2.0, social networking etc.) to stay one step ahead of consumer product & retail companies
• The growth of mobile features and device convergence such as wallet phones will drive up mobile sales

The Changing Technology – In the coming years, newer business technology will enable manufacturers and retailers to become more adaptive of the rapidly changing environment

• RFIDalready is and will continue to be a key technology to enable supply chain transparency in the future:
  • Conair, a company that manufactures food processors, blenders etc. is leveraging RFID to item -level tag products from its manufacturing location in China to Wal-Mart stores in the US to enhance product visibility
  • Kimberly-Clark is collaborating closely with Wal-Mart through RFID technology by sending tagged pallets & cases to the retailer’s distribution center.
  • American Apparel successfully piloted RFID at the item level and, once funding is secured, expects to roll out RFID to all of its 260 stores in the future^d

• The growth of mobile features and device convergence such as wallet phones will drive up mobile sales and Store visits will be enhanced by dynamic digital displays and personalization through a hand-held device or the customers own phone

The Changing Society – The aging of societies in developed countries will have unexpected economic and political consequences. On the other hand, developing markets will see the rise of middle class and also witness increased levels of urbanization

• It is estimated that the world economy will be about 80 percent larger in 2020 than it was in 2000, and average per capita income to be roughly 50 percent higher, according to UnHabitat

The Changing Environment - Increased regulatory pressures from Government, depleting level of natural resources and shift of economic power towards the developing markets will completely alter the environment in which an organization functions

• Unprecedented global economic growth will continue to put pressure on a number of highly strategic resources, including energy, food, and water, and demand is projected to outstrip easily available supplies over the next decade or so
  • For example, non-OPEC liquid hydrocarbon production – crude oil, natural gas liquids, and unconventionals such as tar sands – will not grow commensurate with demand : Global Trends 2025 is the fourth installment in the National Intelligence Council
  • According to Airbus, alternative fuels based on gas or biomass could power 15% of global air traffic by 2020
  • Worldwide use of cereals for ethanol production has expanded by more than 30 percent in 2008 and is projected to grow another 30-plus percent in 2009

• Water scarcity will worsen due to unsustainable use and management of the resource as well as climate change
  • By 2030, the earth’s projected eight billion inhabitants will need 25% more water
  • By 2025, 2/3^rd of the world’s population will be living in water stressed areas
  • It is interesting to see how this will impact food and beverage giants – Nestlé, Unilever, Coca-Cola Co., Anheuser-Busch, etc. – will approached 575 billion liters per year

I guess the next couple of generations will really live in a different world after all.