Pure HMV: the Last Man Standing?
The global entertainment business has been turned upside down by the growth of ecommerce, social media and tablet/smart phone ownership, and business models that have been around for decades are either under stress or failing, according to this interview with Dan Truscott, managing director for HMV's PureHMV loyalty programme, by The Wise Marketer's European editor, Peter Wray of Loyalty Matters.
Music for free, e-Books available online, price deflation, combined with increased competition from large non-specialist retailers (e.g. major supermarkets, Amazon and other online etailers) focusing on chart products have accelerated these trends. They also have to deal with rising store overheads, reduced footfall due to fewer blockbuster releases and the rapid growth of digital media distribution.
Book and Music retailing have felt the impact of this tsunami with a vengeance. Even iconic global brands such as HMV who have been around for a very long time and have always had very strong links to their entertainment community and artists were not immune. HMV (UK) was rescued from formal administration by Hilco Capital - company turnaround specialists - almost a year ago following the completion of negotiations with their administrators, Deloitte. The business was restructured by Hilco in the UK and in mid 2013 also in Ireland following rescue of the brand in the Republic. The plans are to replicate some of the success of their HMV Canada business which was acquired by the same organisation in 2011.
Members of the PureHMV customer loyalty initiative originally launched by the HMV in 2008 with members earning points for money spent in store and online were faced in January 2013 with their unredeemed points balances and accounts being frozen with no clear indications at the time of administration that they would ever receive value for their loyalty to the brand? PureHMV had achieved over nearly 2 million members and they all had a ten month hiatus whilst the future of the brand and then PureHMV was resolved. The new ownership, Hilco Capital, did eventually take a bold decision to offer to honour legacy points from the old company at its own cost in October 2013. PureHMV members were told that they had until 31st January 2014 to reactivate their account on the purehmv.com website and their previous point balance would be transferred over within 14 days.
With this deadline having recently passed, The Wise Marketer felt it would be a good time to interview the recently appointed Managing Director for PureHMV who has been tasked by the Hilco Board with rebuilding trust in the brand and momentum behind the PureHMV loyalty programme. Hilco hired Dan Truscott who had previously been with Barclaycard and GE Money to re-launch Pure in October 2013 in the UK and update the scheme in Canada. Dan is not a stranger to change in the retailing sector and has observed previous employers such as Comet and MFI disappear in the winds of change.
We asked him why he was attracted to the challenges of PureHMV regeneration: "I was seeking a role in which I had full ownership, autonomy and responsibility for the brand plus I had an emotional connection with the HMV brand. The complex structure of a reduced store network, development of online digital and a loyalty programme that required re-launching was a challenge that matched my background and experience".
We asked what the Hilco Board were hoping to achieve with their support for the PureHMV loyalty initiative: "Pure is seen as a way to amplify the experience of the entire HMV brand. We intend to focus on a quality of engagement with the membership, to build targeted and unique experiences linked to members' entertainment passions".
The focus in the last three months has been on re-engaging with the existing PureHMV members and over 175,000 have been re-activated. Dan is keen to avoid the 'membership volume for vanity' trap that many global loyalty programmes perceive as success. He believes that the HMV brand USP is its very strong relationships with artists and the entertainment community. This allows them to leverage this access into 'one-off' special events and artist access that cannot be replicated by other suppliers to the market. He explained how the entire 2nd floor of the flagship Oxford Street store is a dedicated area for hosting special events for music and film stars that will involve specially invited members of the PureHMV loyalty programme. Other benefits including the traditional point's value collection toward rewards will feature within the programme but the focus on the USP of artist access for customers is seen as a key point of difference for PureHMV.
Dan also explained how the re-engagement process with previous members had started to highlight a shift in the 'blend' of the demographic for the programme. HMV customers have traditionally been in the 16-30 age range. During the pre-Christmas re-engagement drive for current PureHMV membership they had started to see some increase in the 30+ age range which Dan feels could be a spike due to the seasonal spend profile of older customers shopping pre-Christmas but it may be a longer term demographic shift in the blend for the programme?
We asked if 'trust in the HMV brand' had been an issue for the re-launch of PureHMV and Dan freely acknowledged that this had been a concern but it was also one of the key reasons for the support in the programme shown by the Hilco Board. He was also seeking to use the depth and personalisation information that will be available in more depth from the active loyalty membership base as a metric to demonstrate the improved profit per customer from the PureHMV member.
Dan has plans to leverage some of the common functionality between the programme that he also manages in Canada (via a separate team) and his UK operations. Where common operational platforms make sense they will be combined but the Canadian and UK/ Irish market have different structural and cultural factors at play that also need to be respected and maintained. Planned upgrades in the IT platforms, development of a mobile app. Linked to the PureHMV programme, more targeted marketing using 'trigger based campaigns', more personalisation of member communications and deeper customer insights are all in the 'To do' list on Dan's priorities. His key focus for the Spring campaigns will be to shift from re-activation of previous members into signing up new members and this activity will take place later in March.
"PureHMV should define what having a deeper relationship with the overall HMV offer means for our customers, fantastic experiences that 'money cannot buy' and greater engagement with the brand" was how Dan signed off the interview.
Dan has a steep mountain to climb in rebuilding trust in a loyalty membership at PureHMV who spent nearly a year waiting to know if their previous loyalty to the HMV brand was going to be another casualty of the demise of the previous ownership. He has challenges across several markets in the UK, Canada and Ireland. Re-engaging with any disenfranchised previous base and getting new customers also signed up is never going to be an easy task.
Key factors that will assist Dan with this challenge are continued support from the Hilco Board (how many loyalty programme management teams face that hurdle is a theme commonly seen in the reviews of other programmes globally). His access to unique events and high profile entertainment artists is however a very powerful benefit from the legacy of the HMV brands itself. Establishing a niche and emotional linkage via the PureHMV loyalty programme could be a significant factor in whether the 'last man standing' entertainment retailer on the high street not only survives but also thrives.