Tough times on the High Street mean retailers need harder working strategies
Article by Stuart Evans, General Manager, ICLP Europe
The economy is undoubtedly entering a difficult period. Interest rates are low, yet consumers are unable or unwilling to continue spending at their previous high levels. To counteract this, retailers must heed the lesson from this year’s summer sales, and utilise customer insight to maximise revenues over the festive shopping season and beyond.
Now, more than ever before, is the time to ensure you are getting the most out of your customer data to help increase your profitability now and in the long term. Retailers must capture data before and during the traditional festive season to thoroughly understand their customers’ purchasing behaviour – and this information needs to be utilised to leverage commercial opportunities during the January sale periods and into 2009.
The question retailers need to start asking themselves is how can they get best value from a loyalty programme? There are a number of ways:
Increase the basket value
The opportunity cost of a deep discount voucher for a product that the customer has never bought from you is effectively nil – by using data to avoid revenue dilution targeted promotions can be extremely aggressive when discreetly sent to a customer.
Cross selling: By knowing your consumer you are better poised to cross sell. A typical programme would provide consumers with six offers: two for things the customer buys, two for things that go with what they buy and two for things that other customers with the same profile buy, in order to create simple upsell and cross sell opportunities.
Ensure customer communications give them a reason to shop more often. Retailers need to remember that customers have limited time. So as a result, retailers that meet more of their needs can achieve a greater share of ‘shopping time’. Highlight your collections to the right people at the right time – for example highlighting a collection of wedding outfits in May/June to women in their 30s.
Retain the best customers
The best customers are those who come back because they want to, not because something makes them. Retailers need to work to understand what drives this desire to return. This could be brand value or product features, but by understanding this retailers can derive greater benefits from customer insight to drive loyalty and thereby customer satisfaction.
Acquire the right customers
This must be a major commercial and loyalty objective for retailers. Understanding who your high value customers are, so that you can look for more of them through targeted acquisition marketing, makes obvious sense for programme owners with the right customer data.
Build strong relationships
Tesco understands the importance of the brand-consumer relationship, and its loyalty programme is an excellent example of using it to drive customer engagement and create profitable relationships. Through data analytics and segmentation, Tesco is able to understand what it can sell to customers, under the Tesco brand value proposition, and move into new areas such as the profitable financial services business. This generates a significant ROI. This is not a suitable loyalty model for all retailers, but it certainly provides food for thought.
Retailers can little afford to throw money away which is where a properly designed and managed loyalty programme will save money. It will reduce the cost of sale/contact, reduce the cost of running a programme, and reduce the marketing and branding costs through properly targeted campaigns.
Data can be technical, there is no getting around it. Working with a specialist provider can help brands get through the minefield and discern meaningful trends from figures. You will know:
– Who to target with what message. Targeted communications mean they are not seen as junk mail, which means any marketing budget goes further.
– What offer to make. Data will also tell you what offer is best for each consumer – is it a specific percentage off or Buy One Get One Free? Retailers can also predict what other items they may be interested in purchasing and send them an offer.
– What channel to use. How do your customers prefer to receive communication from you? Getting it right means less wastage and more cut through.
– When is it best to contact. Do they respond best to end of season sales or does the customer buy something as soon as it hits the shops?
– How often to communicate. Does the customer want to hear about everything or do they have specific demands? Not over or under communicating means getting the most out of your programme.
– Who the most valuable customers are. Retailers need to identify them and then retain and develop these customers.
It is important to remember that a loyalty programme should not be a one-off exercise, it is an investment and money well spent. The cost of developing a programme and then keeping it running is significantly cheaper than running a succession of one-off campaigns.
Finally, you have to use it or lose it! The more a loyalty scheme is used and refined, the stronger it will perform and the bigger the rewards. Greater insights mean retailers can more accurately target consumers and do it more cost effectively.