How are you using consumer data to help you get smart?
What if merchants had the ability to target their best customers – the ones that return regularly and spend repeatedly – with highly customized and relevant offers? Would this result in a closer relationship between merchant and consumer if done appropriately, thereby driving increased loyalty?
A Look at the Current Loyalty Landscape
Membership in retail loyalty schemes is growing. Over the last four years, loyalty programs in the United States have seen a 26 percent increase and have passed the three billion mark for the first time. It seems that customers are as keen to grow loyalty as the merchants they frequent. To incentivize customers to keep coming back, more companies are implementing loyalty or engagement programs. In fact, per an Experian Data Quality study, 91 percent of organizations have such programs.
The price merchants pay to generate loyalty is not purely monetary. Customers want to be able to redeem these points in a more effective and valuable manner – ideally at the POS itself in the form of instant savings. Meanwhile, customers are increasingly interested in getting well-targeted offers that are highly applicable to their current needs. Therefore, merchants must be aware that loyalty is generated through membership rewards coupled with highly targeted offerings and deals.
Early predictive offers online were based on “people who bought this also bought that” and were based on relatively simple cross-purchase correlations; they didn’t depend on substantial knowledge of the customer or product attributes, and thus were rather a blunt instrument. We are now at a point where technology can enable much more targeted offers that are based on a customer’s own past purchasing behavior.
Take Loyalty to the Next Level Through Advanced Analytics
The cost of sophisticated analytic software tools has reduced to a point where merchants of all sizes can use advanced analytics to make highly-targeted, segmented offerings based on customers’ transaction history and shopping behavior. Merchants must collect and reconcile customer data around identities, profiles, purchase history, preferences, and transactions. This data can then form a 360-degree view of all customers – with context, intentions, relationships, and interactions.
By examining the customer experience and using deep behavioral analytics, merchants can grow their business through a better understanding of their most loyal customers’ experience from an omnichannel perspective. Advances in information technology, data gathering, predictive modeling, and analytics are making it possible to deliver something the customer actually wants. Using increasingly granular data, from detailed demographics and psychographics of consumers’ behaviors, merchants are starting to create highly customized offers that steer consumers to the “right” merchandise or service – at the right moment, at the right price and on the right channel.
On the Move
Timing is everything. Advancements in software not only assist merchants in doing a better job of analyzing customer data, they also provide a better delivery mechanism for the improved and more timely offers. Marketing automation platforms enable merchants to build highly targeted campaigns and deliver them to the appropriate target audience through any channel. So, this is where the power lies, which is bringing together marketing automation platform software with advanced targeting and data analytics to enable the delivery of timely, relevant offers across all channels. Whether through the merchant’s app, email, text alerts, during a user session on their e-commerce site or through social media, consumers can be notified of a deal at the right moment.
Add to this the potential of geolocation capability, and the offer can be sent whenever the customer is in the vicinity of a store – including directions to the nearest outlet. To further increase the chances that customers take up an offer, retailers can make time dependent suggestions. Merchants can augment their data by working with banks to understand which of their regular customers have shopped at a competitor’s stores in last six months and offer a time-based incentive to drive these customers to make a purchase.
Deepening Customer Relationships with Data
It’s important for merchants to keep in mind that a long-term customer doesn’t mean they’re loyal and you’re getting all of their business. And, a loyal customer isn’t always a profitable one. This is where Customer Lifetime Value (CLV) comes into play.
As noted, the cost of analytic software tools continues to fall, putting power in the hands of merchants of all sizes to determine who their best customers are and which ones they should spend money, time and effort on to strengthen relationships for the future. As a recent article in Harvard Business Review stated, “By imposing economic discipline, ruthlessly prioritizing segmentation, retention, and monetization, the [CLV] metric assures future customer profitability is top of mind. Consequently, serious customer lifetime value metrics should measure how effectively innovation investment increases customer health and wealth.”
CLV should be a key element in your efforts at increasing cross-sell and retention within your defined target customer segments. For example, through accurate identification of your most valuable customers, as well as those with the potential to be more valuable, a merchant can trigger various marketing campaigns around spending thresholds. Today, 69 percent of companies are tracking the lifetime value of each customer. However, that means about a third are not reviewing this vital metric.
Swapping “Appropriate” Intrusion for Value-added Services
Shoppers who download a retailer’s app are clearly signing on for such services, even requesting it. But once we step into the realm of data purchasing or bank cooperation, merchants need to be sensitive to users’ privacy. Legal, ethical and regulatory issues associated with targeted offer strategies are evolving fast and you must be wary of unwittingly crossing legal or ethical boundaries.
Consumers are driving the loyalty strategies and are expecting improved value-added services in return. Fortunately, the tools are available to help merchants of all sizes deepen and entrench themselves into their customers’ routine to remain their primary retailer of choice.