When Viral Marketing and Householding Intersect

  |  March 6, 2003   |  Comments

Viral marketing and householding frequently intersect. Here's one company doing it right, another that's missing the boat.

There's an interesting crossover between what's traditionally known as "householding" and viral marketing techniques. Where they overlap is a barren zone of lost opportunity for many companies. Let's look at a company doing it right and one that missed the boat.

"Householding" is the process of consolidating several accounts under one entity called a "household." If you do online banking, you've surely linked several accounts and see them all on one screen. If you and your spouse have several credit cards, you've most likely consolidated their billing into one household bill. When a company has the ability to household accounts, a major marketing technique they'll try to use is "share of wallet," or "share of household." Householding's benefits (consolidated billing, already in-use brands) can extend reach within a household. Have a credit card? Get additional cards for the whole family. Use AOL? Get everyone her own screen name!

This works out well for the consumer. There's no heavy lifting involved obtaining a new service or the need for a new company's approval. It works even better for the company. Acquisition hurdles are low and new business costs (postage, paper, etc.) are incremental.

Viral marketing programs are similar, if not intentionally. In a viral marketing program, a company hopes current customers will act as "trusted advisors" and sell the company's services to their friends. Often, current customers get some sort of incentive. Viral marketing is win-win. Companies don't have to spend a lot on acquisition costs, a current client gets some type of reward, and the new client is comfortable with the brand because a friend recommended it.

The disconnect happens when the two worlds converge. My friend Eric Staffin, VP of business development at Intrasphere, emailed after Valentine's Day to show me the viral marketing campaign Starbucks sent out. I don't drink coffee, can't remember the last time I stepped into a Starbucks, and wouldn't have been aware of this problem unless Eric had mentioned it.

The Starbucks card is like a credit card for use at Starbucks. For loyal coffee drinkers, it's an easy way to pay for coffee without cash or a credit card. On a monthly schedule, or when your balance dips below a preset amount, Starbucks charges your credit card and replenishes the card. The auto-replenish feature is what makes the card worthwhile and convenient. The user doesn't have to worry about the balance and won't see a million Starbucks charges on his credit card bill -- just one per month.

The Valentine's Day promotion was a viral marketing campaign to encourage current cardholders to give a card as a gift to a loved one. The problem, one neither Starbucks's marketing nor technical teams took into account, is viral marketing turns into householding when the recipient is a family member.

That opens up a new can of worms.

Starbucks hasn't thought about householding. At least, it hasn't thought about it enough. At present, households are allowed up to three different Starbucks cards. The problem, which defeats the entire purpose of householding, is only one of the three can use the auto-replenish feature. That means in a household, only one card can conveniently be used over a long period. The other cards must be recharged manually, defeating the purpose of using them on the same account.

Let's contrast this with the E-ZPass system, those automatic toll-collector boxes you put on your car's dashboard. E-ZPass thought about householding. You can have up to four E-ZPass boxes in an account. Each works off the same account, meaning reserve funds in your E-ZPass account can be used by any individual box. E-ZPass bills only when the reserve dips too low, regardless of which individual box made the charges. The convenience of consolidating these accounts is real and immediate. My entire family gets through tollbooths a lot quicker. I see one charge on my credit card for all monthly use of the system.

You can't do that with Starbucks. I bought several cards in researching this column. Each acts independently. Only one can have the auto-replenish feature turned on, rendering the others useless. They'd work better as separate accounts. At least then they'd be able to individually auto-replenish.

Who's to blame -- the technical or marketing folks? Assuming tech folks implement what they're told to implement, I have to blame marketing (unless the technical folks pushed back on the "correct" functionality for a reason I'm unaware of). Starbucks's marketing department built the Valentine's Day program as a terrific viral marketing campaign, never thinking it was simultaneously running a share-of-household campaign. So no one built in functionality to support both campaign types.

Next time you spec out a viral or share-of-household campaign, consider the possibility the viral campaign might be sent to family members and the household campaign might be sent to friends.

Understanding the convergence of householding and viral marketing, and accounting for that overlap in execution, will lead to more robust acquisition campaigns that work on multiple levels. After all, you can't control who my friends and family are.

Until next time...



Jack Aaronson

Jack Aaronson, CEO of The Aaronson Group and corporate lecturer, is a sought-after expert on enhanced user experiences, customer conversion, retention, and loyalty. If only a small percentage of people who arrive at your home page transact with your company (and even fewer return to transact again), Jack and his company can help. He also publishes a newsletter about multichannel marketing, personalization, user experience, and other related issues. He has keynoted most major marketing conferences around the world and regularly speaks at Shop.org and other major industry shows. You can learn more about Jack through his LinkedIn profile.

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