Article

Seven ways to tweak your loyalty initiatives for success

The bigger a company gets, the easier it is for a customer to get lost in the growing focus on sales, margin and scaling up.

July 25, 2011

Small-business retail is like a fleet of sailing vessels, able to react nimbly and personally to customer needs. Larger retailers are more like freighters - not so quick on the rudder. Yet big retailers can (and should) still achieve an equal level of responsive customer relevance.

The bigger a company gets, the easier it is for a customer to get lost in the growing focus on sales, margin, and scaling up. But with proper direction, you can lead even the largest customer initiatives, and put some more capital into your business. In a recent research study that LoyaltyOne and DemandTec commissioned IDC Research to complete, 75 percent of retailers list customer focus among their top three success factors. For retailers leading the pack in same store-sales, the level of importance is even higher, with 85 percent indicating that responding to the customer makes the top three success factor list.

Chart a flexible course

Your organization must set specific goals and the most-efficient means for achieving them. Design your new initiative knowing that you can and almost certainly will adjust your plans along the way. Most organizations develop a 3-5 year roadmap calculating the return on investment for data management and resource commitments. It will be refined by further detail, based on what you learn along the way, especially in the early stages.

The keys are to build in strategic checkpoints, and not get bogged down in designing perfection and fretting possible obstacles. Plot the course by developing a structured learning plan, building in testing opportunities and looking through a customer-focused lens to make decisions.

Employ a multi-skilled team

Build a collaborative team that invites everyone to understand the objectives, embrace the vision and contribute. Successful journeys start with executive-level commitment and a strong team of cross-functional contributors who can execute the plan. It's important to remember that all disciplines be represented - from marketing and merchandising to operations and finance.

Even if a particular area's contributions seem fleeting, including all groups helps socialize the journey and ensure that the process is integrated as it grows. This provides a high level of engagement and impact assessment while also minimizing errors.

Designate a "customer captain"

Today many organizations are creating either C-level or senior executive positions with two mandates: advocating for the customer or managing the project internally. These consumer-centricity efforts should be championed right from the top. Our study shows that most retailers are on the right path, with 76 percent having a senior consumer-focused role, most often reporting either to the CEO (30 percent) or to a senior marketing executive (36 percent).

Steer by your best customers

Typically, 20-40 percent of your customers drive 40 percent-80 percent or more of your sales—and sometimes those numbers shift more drastically. The question then becomes, "Who are these customers and what are they buying?" When you understand the answers, the next question is, "Why do we invest resources and apply strategies equally across the organization?"

Insights into the demographics or lifestages of your customers, into the key categories or solutions they turn to within your store, and into the degree by which customers and experiences vary from store to store—because of such factors as urban density, ethnicity and customer lifestyle—allow you to adjust investments, marketing, merchandising and other initiatives.

Yet, the study shows that only 47 percent of retailers reported using consumer insight to inform activities like demand planning/forecasting and 40 percent reported using insight to guide private label product development.

Coordinate the team

The idea of spreading around corporate-level data from customer-based efforts like loyalty programs can sound scary, as some within the organization will worry about how that will impact their touch points. The web operators have their set of numbers, marketing and frontline stores have theirs, and so on. But this information empowers enterprise-wide employee action, and at some point, you must unleash that data.

Today, most companies measure units and sales and margin. A merchant, for example, can use those traditional metrics to evaluate the potential of particular programs, promotions or offers. But adding customer data to the decision-making process provides the opportunity to also evaluate not only the margin earned by a particular program, but also the program's impact on your best customers. How did the initiative affect the people you really need to be driving into your store or to your website?

Determining customer impact helps to mitigate "convenient reasoning," assuring that all parts of the business rally around one source of truth and one number in measuring your actions' effects on best customers.

Share your goals

Share your goals, your customer strategy and the segments you're targeting with your external partners, from manufacturers and technology vendors to marketing and creative agencies, and even the results of your successes. Our study shows that high-performing retailers are ahead of others in this regard as well – 47 percent share data/insights to generate additional revenue streams while only 15 percent of the rest of the pack see this benefit. This sort of communication allows your vendors to develop needed products or to innovate partnerships to your mutual benefit.

Learn from mistakes

There is no failure in learning from mistakes, and here the data will also lead to surprising wins. Successful organizations ready themselves for change and then are willing to go back and tweak as necessary.

Setting the rudder is critical and when you leverage data to change how you view customers and then how you do business, your business is on an unfaltering course to a rich and vibrant destination.

Mitch Martin is director, business and consumer intelligence for LoyaltyOne Consulting. (Photo by Jacob Botter.) For more information on this topic, visit our loyalty programs research center.