Customer loyalty data can seem overwhelming, at times, to brands. Concerns about too much data, deciphering what it all means, and figuring out how to best leverage it in the future can pose a daunting challenge.
Loyalty360 caught up with Thanx CEO Zach Goldstein to learn more about the challenges associated with customer loyalty data and innovative ways it can be used.
Many marketers are challenged by data. Can you talk about some of the ways they can use customer loyalty data in innovative ways?
Goldstein: Real-world businesses are beginning to see the need for high-quality, actionable data. The companies who embrace their customer data and use it to inform strategy are the brands who are thriving—which should come as no surprise as the leading online brands, such as Amazon have been using these tactics for years. Modern customers expect to be treated differently; they are increasingly “promiscuous” on the whole, yet loyalty is more important than ever as an elite tier of repeat customers are driving an increasing share of revenue. Customer data, and the personalization that is enabled, as a result, is the key to unlocking this competitive advantage.
One of the most exciting insights we’ve uncovered after studying millions Thanx customer transactions is that nearly 70 percent of revenue comes from the top 25 percent of customers—and we see this pareto-esque breakdown in every industry we operate in. Armed with this intel, our merchants place a huge priority on identifying these valuable customers so that they can creatively engage and retain these top spenders. For elite VIPs, our innovative merchants award special status—sending holiday gifts such as custom steak knives or invites to elite experiences such as VIP shopping hours. Similarly, this data can be used to solve problems such as customer attrition when something goes wrong—at Thanx, we’ve built statistical models to understand when a customer is likely on the verge of churning to enable our merchants to reach out and intervene. The important themes here are data, personalization, and to-the-dollar measurement.
What is the challenge of data, as far as many marketers feeling overwhelmed by the volume of it?
Goldstein: Knowing exactly how to use your data to impact your bottom line separates marketers who are empowered by data from those who are confounded by it.
I’d say there are two main challenges when it comes to data: The first is making sense of the sheer amount of information you’re ingesting every day. Most offline businesses have vast amounts of data housed in their POS systems but they haven’t been able to tap into that intelligence to drive actual business outcomes. In fact, some businesses get so caught up in the act of collecting data—seeking greater and greater granularity—that they end up without the resources to make sense of it. Starting small is the key.
For instance, nearly every great loyalty program is based on three key pieces of data—recency, frequency, and lifetime value. With a simple understanding of visit history and check sizes, a marketer is armed with keen insight into a customer’s behavior—start there! You don’t need to know what the weather was that day, who the server was or even what the person bought. That granularity can come down the line but will only be confounding and lead to “red herring” events while your program is still nascent. Focus on what matters & prioritize collecting quality, actionable data over worrying about getting “enough” data and then feeling paralyzed by it.
Ultimately, data is only as good as what you do with it—automating customer outreach and marketing campaigns based on the transaction data you’re already collecting is one way to bring customer intelligence to life. But, a simple rule of thumb is to optimize around data that you have the capabilities to act on. If you don’t know what action you would take based on the information or don’t have the time or resources to take action, start simpler.
What are marketers doing well with using customer data in innovative ways, and where do the challenges lie?
Goldstein: Marketers are growing increasingly data-hungry, and offline business is no exception. While digital marketing has been data-driven for years, restaurateurs and retailers are just now coming up to speed. Even giants like Chipotle—huge, publicly traded companies with resources to spare—are falling short on the data front, failing to collect customer data when business is good, and then resorting to things like couponing to drive more business when things change.
On the flipside, you have a brand like Starbucks, who shifted their loyalty program to a spend-based program, understanding that higher check customers were responsible for more revenue, and creating their program around that intelligence. Like we described before, that VIP population is the single largest resource to tap into for continued same-store sales increases, and consequently, Starbucks took that data and used it to drive the entire redesign of their loyalty program and app. And the results are clear—Starbucks reported an uptick in spending across all loyalty members and the addition of nearly 1 million more customers to the program. Using business intelligence from loyalty program data to continue improving customer-facing programs isn’t just available to brands like Starbucks; smaller businesses with smart loyalty programs have access to this same intelligence (our merchants will testify to this fact!) and the return on investment can be as much as 1000 percent when done right.
What do you foresee as far as trends in the use of customer loyalty data this year and beyond?
Goldstein: Offline brands are beginning to see data as a “need to have” rather than a “nice to have”, and I anticipate this trend continuing. For years, marketing budgets have been set as a fixed percent of sales—an archaic practice as online and enterprise advertising has evolved to be far more dynamic based on customer acquisition costs and return on investment. This trend is making its way to real-world businesses as well and we will see leading brands drastically decrease spend on unattributable marketing channels and massively ramp spending where results can be directly measured. The companies that do this well will see huge, double-digit increases in same-store sales, while those that stick with “tried and true” channels that are more akin to shooting in the dark will see sizeable declines.
As forward-thinking brands begin embracing their customer data and use it to automate marketing and customer relationship management, the “innovate or die” mentality will begin challenging brands in competitive offline industries (restaurants, retail, car washes, etc.) to get serious about capturing and using data in meaningful ways. Specifically, I see personalized messaging as a huge opportunity for brands who are just now starting to work with their loyalty data. The engagement that brands see from sending the right message to the right person at the right time (example: a push notification about loyalty progress right after a purchase) will render the old “spray and pray” email coupons obsolete−we already see 10x greater redemption rates, for instance.
While there isn’t a one-size-fits-all solution for loyalty, one truth is consistent: loyalty is about focusing on your best customers and making them feel special—sending impersonal email blasts no longer works. Personalized loyalty marketing, data-driven segmentation, and real-time measurement will continue to drive modern consumer engagement strategy.