Today's path to purchase is radically different. Consumers shop where they want, how they want and when they want, often with their mobile devices firmly in hand. Consumers — not retailers — are now in charge.

Imagine Janet, a mother of one walking into National Arco, a hypothetical retail chain she visits every couple of months, but is her second favorite to its competitor. She walks into a beautifully designed store with clearly labeled aisles, no discount shelf-barkers, and barely a shopper in sight. As she enters the store her smartphone buzzes with nine offers, three of which display on her home screen:

  • Buy a laptop and get 150 bonus points
  • Try our new widget with a 50 percent discount today and 50 bonus points
  • Buy a second book and get $2.50 off and 75 bonus points

As Janet walks the aisles, she plants those context-based deals in the back of her mind and recognizes that the prices are really good — perhaps not the lowest, but close enough. When she used to come to National Arco many years ago, she earned 10 points for every $10 spent on everything she bought. There were extra points on certain items, but they often did not interest her. Today she earns only one point for every $10 spent, but the bonuses are much more enticing.

Janet is no longer a “deal-hunter," but a “deal-taker." Consequently, she is a more satisfied consumer and is able to shop quicker, spending more because of the emotional jolt from getting offers she is actually interested in.

For retailers, this means more sales, bigger market share and a higher profit mix. According to a Harvard Business Review study, personalized offers have five to eight times higher ROI than traditional offers. So, what do marketers need to do to breed more deal-takers?

Nanotargeting Turns Deal-Hunters Into Deal-Takers

Shoppers may be more empowered than ever before, but they are often distracted, navigating a fragmented, multi-channel universe where the journey to checkout is complex and winding. This has created a sea change for marketers, who have been forced to re-evaluate the traditional tools they use to win consumers over.

To meet the needs of shoppers and stay ahead in a competitive landscape, retailers realize they must present shoppers with the right offer, at the right time, and in the right channel with nanotargeting, where messages are customized and tailored to meet a single consumer's needs.

While the technology is still evolving, smart data and advanced loyalty programming are finally making nanotargeting a reality. Ultimately, we believe nanotargeting will become the cornerstone of future marketing efforts and retailers will leave mass promotional campaigns, such as flyers, circulars and discounts, behind.

Enabled by loyalty data, nanotargeting will become an attractive alternative that increases sales and improves ROI. Several forward-thinking retailers are hard at work figuring out how to deliver this data-driven, loyalty-boosting vision, enjoying varying degrees of success due to different capability levels and the overall complexity of these efforts — which, far from an IT project, is a company-wide endeavour.

 

The Next Evolution of Customer Relationship Management

One challenge companies must immediately overcome is the assumption that Customer Relationship Management ("CRM") and loyalty are interchangeable. CRM, which manages interactions with current and future customers, is actually just a small component of loyalty, which uses currency and smart data to have conversations with customers and them to change their behavior for a mutual reward. To rev the full CRM engine, companies leverage those customer databases and combine them with additional demographic and shopping information to get a 360-degree view of their consumer.

This is where the future economics of loyalty marketing — and ultimately, nanotargeting — comes in. With shopper information gathered through well-run loyalty programs, retailers can implement better targeting and glean important insights that dramatically affect their bottom line.

 

Conclusion: Data-driven loyalty is the future of personalization and retail economic success.

Retailers have more access to customer information than ever before. But to turn that data into dollar-driven insights, they need to have a solid foundation of detailed demographic information about each individual as well as propositions that trigger an emotional response in consumers. That is the power of data-driven loyalty programs.

The future economics of loyalty in retail will depend on a variety of factors:
 

  • Allocating the right budget to fuel a forward-thinking program.
  • Looking beyond discounts and promotions towards personalized offers and rewards.
  • Going beyond transactional data towards drilled-down demographic information.
  • Providing value propositions that drive repeat visits and long-term consumer relationships.

To focus your efforts, consider rallying around these principles:

Place all your data efforts in the service of customers. Serving customers with your data efforts means seeking permission, using data transparently, and rewarding them for voluntarily sharing personal information. Even the largest social and search giants will live or die on their willingness to serve their customers, rather than abuse their trust.

Start with transactions, then add interactions. Connecting a purchase to an individual customer opens up tangible and immediate benefits — you can devise offers that increase lift, gain wallet share, and reduce churn. Connect the dots from the transaction to interactions through social, mobile, or web channels to build a robust view of customer value.

Build relationships based on trust, commitment, and reciprocity. Information is useful only if it provides insight that helps you strengthen customer relationships. Customers are fickle and promiscuous, but they are loyal to brands that build trust through transparency, demonstrate commitment through recognition, and deliver reciprocity through rewards.

Treat data as a renewable resource. Some are calling data “the new oil", but leveraging it to create long-term value means thinking of data less as a fossil fuel and more as a sustainable, renewal resource. Treat your data as a capital asset rather than a marketing expense, and use that asset to collaborate with partners who possess the expertise to help you build relationships with your customers.

If we rally around these principles as marketers, we will ensure a bright future in which technology, data collection, and marketing communications serve their proper place in building a future of real relationships.

 

Manu Sarna is Vice President, Loyalty Strategy & Analytics.

For the full report please click here.

For more information contact us at [email protected] or visit www.aimia.com

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