When looking at the future of loyalty marketing and the trends that will shape the space, we see boundaries that will continue to expand outward. The key to this next stage of evolution will be leveraging the power of customer data. Data-driven enterprises will look beyond loyalty program return-on-investment (ROI) metrics and discover that the true value of data lies in its ability to fundamentally transform the customer experience by driving insight and benefit back into the core business model. Particularly in the retail space, loyalty programs will play a pivotal role in the ability to identify customers and harness data to change how they shop, how they experience the store and what experiences accrue to them.
We’ve seen evidence that customer data is driving the core business models of a handful of companies that understand how the customer experience drives their success. Examples include:
AIR MILES Reward Program: In Canada, the AIR MILES® Reward Program has increased both response rates and relevance for one of its grocery partners by marrying SKU level data from the retailer with AIR MILES Collector information to identify targets for mailings. In addition, AIR MILES has worked with a leading pharmacy retailer to review the company’s flyer distribution strategy. By overlaying Collector data with store locations, demographics, and forward sortation area (FSA) boundaries, AIR MILES assigned an ROI figure to each FSA to determine which postal codes represented the highest and lowest possible returns for the retailer. By dropping the lowest performing FSA’s from its flyer program, AIR MILES helped the pharmacy realize significant savings on flyer printing & distribution costs.
Best Buy Stores, Inc.: In 2005 Best Buy’s Brad Anderson announced the retailer’s intention to marry data from the Reward Zone loyalty program with their Customer Centricity initiative that has seen the company launch store concepts built around key customer segments. Anderson explained that the company would overlay the transactional data collected from Reward Zone and blend it with their existing Customer Centricity segments. The combination, he said, would strengthen their customer insights, allow them to create sub-segments within their core segments and score the other 50 percent of their customers that they couldn’t categorize using their primary segmentation methodology.
Tesco: Loyalty gurus around the world hold up U.K. grocer Tesco as the gold standard of companies leveraging loyalty data to fundamentally change the way they do business. Launched in 1994, Tesco’s Club Card helped move Tesco’s market position in the U.K. from third to first; today, over 40 percent of U.K. households are members. Tesco segments their Club Card shoppers into six behavior categories and sends 5 million to 6 million unique mailings to their 10 million members annually. For their troubles, they enjoy a 20 to 40 percent redemption rate. Tesco is among the global leaders in loyalty innovation.