Nov
16
2012

Should you stay loyal to loyalty?

Loyalty schemes aren’t right for every retailer, but the rich customer insight they can provide is.

In theory loyalty cards provide retailers with an incredibly rich source of consumer data, allowing them to promote customer retention, avoid wasted generic marketing spend and engage with the most lucrative customer segments.

But the vast majority of retailers’ loyalty schemes have, until now, been relatively binary in nature – limited to knowing person X buys item Y, or used to segment the customer-base and enhance wider marketing capability. It’s hardly surprising that some retailers are questioning whether loyalty schemes are beginning to run out of steam.

Retail nirvana
Loyalty schemes are expensive and not suitable for every retailer. Where a retailer benefits from frequent and high volume customer footfall, and where the environment is highly competitive, the case for investment can be justified. Supermarkets are a great example – for them, understanding customer needs and reacting to these quickly can help secure a competitive advantage. In slower moving sectors, like household goods, the cost can seldom be justified – consumers don’t always visit stores frequently enough.

In the past, if a retailer did not have a loyalty card their customers were anonymous – only becoming visible through market research panels, exit and postcode surveys. Today, with the advent of web-analytics and other online insight, consumer activity on the web can be widely understood. This is all without the need for a costly loyalty card. The retail nirvana of the future has to be about recognising who a consumer is when they use their loyalty card in-store, but also how they transact online, with the necessary permissions, and how they might be interacting with search and social media. This scenario hands retailers a true multi-channel view of who consumers are.

Where to go from here?
But used appropriately, loyalty cards still have a significant role to play. For those retailers with schemes to simply throw them away would be wrong – so much data is still a very powerful tool, so how should they evolve?

One key dimension to add to the current segmentation is an understanding of consumer wealth. You know they shop in your outlet, but how much of their spend are you getting; 5%, 50%, or more? Overlaying these wealth factors will indeed assist in assessing headroom and up-sell, which is crucial given that acquisition is getting harder to come by.

Also bear in mind the powerful nature of social media; customer insight in these areas is essential, are you overlaying not just what they buy but what they think of you?
Loyalty schemes are here to stay, but more information must be added to take customer marketing to the next level. Experian has a long history of helping retailers – both with and without loyalty schemes – to develop this rich customer insight to direct everything from store network planning, selection of trial stores, and range planning, to local, national and international marketing initiatives.


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