By John Hennessy
According to Jane Johnson and Web Fletcher, writing for Direct magazine, the conventional wisdom followed by many retailers hampers the success of loyalty programs. They continue that few loyalty programs are differentiated based on solid customer insights.
Breaking out of this syndrome includes making your loyalty effort an integral part of a broader customer-centric strategy that creates a sustainable advantage based on the unique needs of distinct customer segments.
The authors pose several questions to determine how your loyalty program shapes up:
- Do you truly know what your customers value and are willing to pay for?
- When customers come across your membership card in their wallet, is there something special they'll remember about you?
- Will you be able to predict customer behavior and take actions that will make them think, "Wow, this company really knows what I need and what I want"?
They urge retailers to use the insights available from their loyalty programs to shift the terms of the battle.
Two key competencies are identified as necessary to take a program to the next generation:
- Advanced analytics that allow retailers to understand specific loyalty drivers for each marketable customer segment, and;
- Integration capabilities to convert insights into segment-specific offers.
Moderator's Comment: Is lack of customer data analysis truly what is holding back the success of loyalty programs? If not, what is?
I both agree and disagree with the authors.
I agree that price is not the end game. Using purchase history to demonstrate to your shoppers that you understand their preferences is more powerful than price and a way to differentiate your store.
Put differently, if you know what shoppers like and act on that knowledge, you don't need to discount as heavily. The shopper likes the product and doesn't need much incentive to buy more of it. Selecting products to promote based on the preferences of a shopper also demonstrates your loyalty to your shoppers in a way others retailers do not.
I disagree with the definition of Next Generation loyalty programs provided by the authors. They shoot low in defining it as superior analytics. Superior analytics are available today. The limitation has been the inability to execute.
Next generation loyalty programs execute in real time, based on ongoing analysis of purchase data. They don't generate discoveries. They generate sales results.
Shopper preferences don't sit still. You need to keep moving to keep up.
[Full disclosure: developing and executing relevant offers based on the automatic, daily assessment of shopper preferences derived from daily analysis of purchase data is what Concept Shopping does for major supermarkets and consumer packaged goods companies.] - John Hennessy - Moderator