Sept. 13, 2011
Too often companies create loyalty programs as a one-off tactic, rather than embedding loyalty as part of a holistic approach to the business. As a result, the loyalty program becomes one more silo in the business, creating a disjointed experience for the customer and a missed opportunity for the business.
We all share stories about receiving promotional offers from a company we shop with regularly only to be told that the offer is available only to "new" customers. Or we receive offers for products that are completely irrelevant, which is very frustrating. These experiences leave customers wondering why the retailer doesn't know them any better or appreciate their loyalty.
The disconnect that customers feel is the result of the siloed approach to loyalty programs that many organizations take. All too often "customer loyalty" is delegated to one part of the organization. While one team administers loyalty rewards and communications, a separate team sends mailers to attract "new" customers, not realizing that they are unintentionally targeting the same people. Often, customer data is housed in a separate mart from the organization's transactional data, which means that different parts of the organization are making decisions based on different information. Customers expect more from retailers and they should.
It starts with the data
One of the most valuable assets retailers have is the data it collects on its shoppers. However, in many companies, this data is not connected and shared across the organization in a way that can positively impact decision-making.
For example, the marketing department may have data on loyalty program customers and report on points earned and redeemed, but not know how customers chose to use their rewards to make their experience even better. Similarly, merchandising may have reams of data on units and dollars sold, but not know which customers are buying which products. The Internet teams may study how the average user navigates the website, but have no understanding of how the retailer's best customers use it. Joining these disparate data streams together to create a single view of the customer is the first step to building a true customer-centered business.
Sharing data to unite the organization and create more relevance for the customer
Nearly every retailer, no matter the frequency of purchase, has a core group of customers that drive a disproportionate share of the business. Understanding the needs, wants, and behaviors of that group of customers and acting on that knowledge is the key to building sustainable growth.
However, when different areas of an organization create their own definitions of valuable customers, opportunities can be missed. For example, the online side of a business may define best customers based on online spend, while the brick and mortar side defines best customers based on spend in store. In their attempts to grow their own share of the business, these two groups often create programs that compete with one another. This approach misses the fact that many of the retailer's best customers shop in both channels. By using connected data to define a single view of the retailer's best customers, organizations can understand customer behavior through all channels and create a united strategy that delights customers however they choose to shop.
Embed the common customer language into all decisions
Once all parts of the business have a common understanding of their core customers, information about what these customers need, want and buy should be made accessible to all decision makers. When an organization is not aligned on the impact their decisions can have on the customer's experience, well-intentioned decisions can have a negative impact on the whole retailer.
Consider a buyer who decides to stop carrying Brand ABC in store because of low margin per square foot. Using traditional metrics, this would seem to be the obvious way to make room for higher-producing items. However, without knowing that Brand ABC is very important to a large portion of the retailer's most valuable customers, removing that brand could be destructive to shopping patterns. If those customers can no longer find the brand they want, the retailer risks not only the purchases of that brand, but all other purchases the customer makes outside the category, to their competition.
Understanding what is important to the retailer's core customers and ensuring all decisions are aligned with the common goal can save the retailer from alienating those customers it has worked so hard to win.
Measure all activities using the common customer lens for continuous improvement
Adding a customer lens to business processes cannot stop once a decision has been made. Successful companies know that they must measure the impact of their activities. However, if success measures are not aligned to reflect the focus on the customer, the organization will quickly revert back to old decisions and ways of doing business.
For example, if an organization aligns on a goal of retaining more of its best customers but then continues to measure its promotions only on sales or traffic uplift, there is no incentive for exploring alternative tactics that will reward the behavior they seek. Instead, all decisions, whether assortment, pricing, promotions or operations should be measured by the impact they have on the retailer's core customers in addition to traditional metrics.
A loyalty approach can be successful for all businesses, regardless of the frequency of purchase. The key is the integration of data and insights across the organization and alignment on the common mission to meet the needs and wants of their customers in the way that they want to be served. Companies that get it right will be rewarded with delighted customers and an improvement to their bottom line.
Kathy Grigg is vice president, Client Solutions at dunnhumbyUSA, responsible for delivering innovative, foundational solutions for clients and further distinguishing the dunnhumby solutions portfolio. (Photo by Nick J. Webb.)