Customer Growth

Although we might want it to, building brand loyalty doesn’t move at the speed of technology. It moves at the speed of the customer. It’s important to remember this as mobile technology starts to round the corner. Mobile is a brilliant way to communicate with the customer and acquire customers. And like anything that has customer acquisition involved, data is essential.

We have seen some very smart mobile applications lately. Recognizing consumers' need to use mobile phones while shopping, Motorola has launched Mobile Loyalty Solution, which serves as an extension of existing loyalty card programs or as the basis for new digital efforts. The service eliminates the need for membership cards and paper coupons. More importantly retailers are using it to build a database of shopper product interests, purchase habits and preferences. The Motorola offering works with most smartphones, and will allows retailers to target consumers with the best offers and discounts on products that interest them. But let’s not forget smartphones are somewhere around 35 to 40 percent of your customers. It’s part of your customer base and will grow. Use data to track that growth.
The mobile loyalty programs are just starting to find a foothold in the QSR vertical loyalty programs, according to a 2009 report from information commerce provider First Data.

But they are starting to show themselves. Southern California pizza chain zPizza is implementing a mobile partnership with Mocapay, a Denver-based company that created a mobile platform for zpizza to use for loyalty and gift-card efforts. The platform allows customers to use mobile phones in place of plastic loyalty or gift cards. They can pay at point of sale and check card balances simply by using their phone.

Will it work? Depends how you define success. We encourage retailers in the QSR space to look hard at mobile loyalty programs for customer segmentation, and customer market research  as their customers integrate mobile commerce into their lives. Remember that the technology is not the driver. Remember that customer retention and engagement are the key drivers. Look at your customer data first, and proceed with caution.

With the economy still sorting itself out and the post-holiday period giving a chance to review 2009, I suppose it would easy for retailers, restaurants or any business to put customers in two segments. Those two segments: buyers and non-buyers. But retailing is never that simple and segmentation has never been more important.

We’ve been among those evangelizing segmentation for years. The more mainstream analytics business has caught up to the science of segmentation particularly behavioral segmentation.  Best-selling books such as Predictably Irrational  (Arielly, 2008) and Nudge  (Sunstein, 2008) detail the nuances of individuals’ behavior through the use of careful, controlled studies. Findings frequently run counter to popular understanding, and researchers in this space are uncovering a wealth of opportunities for understanding consumer behavior.  A recent article in TIME magazine recounts the team of behavioralists leveraged by the successful Obama campaign, and the likely implications of the behavioral revolution in American politics (Grunwald, 2009).

Behavioral segmentation seeks to identify discrete groups of people based on actual behavior.  To accomplish this, databases are often used to track and record customer behavior.  One of the most common ways that customer behavior is collected is through the use of loyalty programs.  Other ways that customer behavior can be tracked include responses to email campaigns, direct mail campaigns, or website activity through a website that requires its users to register in order to access content.

All of these data capture mechanisms provide insight into actual customer behavior, including but not limited to:

·         the products that a customer has purchased

·         the frequency with which a customer visits a store or website

·         the type of content a customer has accessed on a website

·         the average amount of a given customer’s transaction,

·         the number of emails that a customer has opened or clicked

·         direct mail pieces that a customer has responded to

Often, the sheer volume of behavioral data can be overwhelming.  A single table designed to record the history of email sends may easily result in hundreds of millions of records for medium to large list sizes. Some results from behavior-based loyalty will be easy to see. Incremental spending and profit cultivated from the targeted customer groups will grow. ROI for the overall loyalty program will spike with more efficient spending. Customers will become more engaged across all channels and more responsive to targeted offers. Companies can also expect some welcome unforeseen  consequences beyond these more predictable ones.

1)       Database growth: The overall size of a company’s database will grow if behavior-based loyalty is embraced. This will be rooted in a commitment to enticing the right customers to engage with the company and enroll in an exciting rather than predictable program. It will grow in strength from the continued interaction that customers have with your program, continuing to leave tracks of their purchase behaviors and evidence of their attitudes and emotions. Emotional connection with behavior-based loyalty will simply be stronger and the database will gain quality as a result.

2)       Segment strength: Because behavior-based loyalty starts from the standpoint of changing the behavior of a specific group, the company owns that knowledge. It knows how to get a specific segment to move their behavior and then move the needle on sales. “It’s not realistic to expect that you can move an entire customer base,” says MacCurrach. “But you can move the right segment of that customer base with the right knowledge and the right reward scheme.”

3)       Trackable programs: A company doesn’t have to guess about a loyalty program if behavior is at the center. It can use the knowledge gained to answer definitively questions such as did this offer work? Did the reward work? Did the customer respond with incremental behavior?

4)       Create buzz: It’s always one step tougher to predict and measure the word of mouth value created by a loyalty program, but it much more likely that customers and the press will advocate a program that surprises them rather than one that rewards them predictably.

Most importantly retailers in most every vertical need to embrace behavioral based loyalty to move from “I think I know my customer” to “I know my customer.” Knowing your customers is an essential competitive advantage. Knowing what will make them more profitable through a surprise and delight strategy is the next level of customer knowledge and the true cutting edge of customer loyalty. Without it a company runs the risk of being just another number among the 701 million retail industry loyalty programs. By employing it, retailers have a shot at making loyalty programs work for their customers and for a neglected part of their interests – the bottom line.