The CAIPS Retriever

AirMiles: marketing prehistory

The term prehistory usually describes that (long) period in human evolution before written history became available. That is, before writing was invented. Figuratively speaking of programs that are entirely obsolete, I argue that marketers can discover marketing prehistory in Toronto, Ontario. The sad thing is that - unlike archaeologists - marketers can see prehistory directly; they do not need to dig underneath the earth. For instance AirMiles, a database marketing program so badly conceived and executed that it belongs to bygone ages of marketing.

What is database marketing?

The advent of industrialization and mass production imposed on marketers the challenge of mass marketing. Personalization, an essential characteristic of good marketing, was lost because marketers had to sell undifferentiated products/services to huge numbers of customers. Later on, computers helped reinstating personalization through database marketing. With it, each customer had her own computerized and readily accessible record and could be offered as good a personalized approach as that of Mom and Pop's stores.

NB: database marketing is not fake personalization. It merely extends the individual's natural information storage capacity (what we call memory) and ensures that everyone on the marketers' side has access to the same wealth of customer knowledge. However, the computer is only an instrument; it needs to be instructed what to do because it will never invent something on its own. So, the ball is still in the marketers' court.

There is a plethora of database marketing programs out there. Credit cards, airlines or hotel chains are well-known examples of companies offering programs that entice customers to exchange benefits with voluntary participation in database marketing programs. Since in the world of consumer benefits discount price is the undisputed king, it is no wonder that the best marketers tied database marketing to discount pricing.

Why is AirMiles prehistory?

Database marketing makes sense only when improving customer experience. But, considering only the rewards component, when using her AirMiles card in connection with a monthly budget of $300.00 in groceries and $50.00 in pharmacy products, the average Jane earns about 20 points a month. In order to trade a two-slice toaster (at 500 points), she needs to spend about $8,000.00 or wait for more than two years at her expense level - quite a turnoff.

Moreover, Jane only earns points for full $20.00 chunks spent. At the end of each week, the marginal fraction under $20.00 is discarded. The program combines lack of incentives with unnecessary meanness. Marketing would fare better without AirMiles.

How real database marketing works

For ease of comparison, the examples are limited to grocery and pharmacy shopping in the Washington, DC metro area.

Giant Foods' BonusCard and Safeway's Safeway Club

• Incentives: substantial instant cash discounts on lots of products. Savings show up on the receipt, both for the day's and year's purchases.
• More incentives: card, manufacturer and in store discounts add up. The stores even double manufacturers' discounts. How does 50% off sound?
• Being nice to customers: in theory, getting the discounts is tied to using the card. In practice, if you fail to present your card the cashier scans a dummy card for you. This way, you still get the discounts even though you pass the benefits of personalization.
• Maintaining the database in good health: a product mispriced in the cashiers' database - compared to the isle price tag or the weekly flier price - earns the customer an extra product for free, without any question asked.

CVS/pharmacy's ExtraCare

A marketing queen: good database marketing programs embed good marketing practices that in turn retain satisfied customers - and such is the case with ExtraCare. As the program promised, after shopping and using my card for a while I received personalized offers in the mail. I was offered further discounts on items I shopped most. Once, after tendering no other payment than discount coupons for my purchase it resulted that CVS/pharmacy still owed me a balance. To the cashier's glory, she did not falter and did not ask the manager to solve this complex problem. She just opened the cash machine and handed me the change. A marketing queen that cashier!

A less than free market

With marketing knowledge lacking, both companies and customers fare worse - no company has ever prospered without making its customers happy. Giant Foods, Safeway and CVS/pharmacy are good because they compete shoulder to shoulder in the Washington, DC metro area. But in Toronto bad marketing survives because of the market being less than free, lowering every newcomer's prospects - from getting a good job to getting a decent life.