Consumer data is the 'new oil' of customer loyalty
If consumer data is the 'new oil' in the world of customer loyalty, who owns it? The refiners, or the producers? The Wise Marketer's European contributing editor, Peter Wray, uncovered the answers to today's most pressing questions in the field of loyalty marketing at the recent Loyalty World conference in London.
The conference itself attracted some of the loyalty sector's current and past 'movers and shakers' as key note speakers, supported by a wide range of presentations and panel sessions highlighting themes such as customer insight, social media, multi-channel marketing, and rewards management.
The McKinsey-defined era of 'Big Data' was, however, a recurring theme throughout, and provided the glue that seemed to bond all other themes together. Loyalty programmes in all formats and media approaches are increasingly being justified in terms of the data flow they provide, combined with the sophisticated data analysis techniques that are now used to turn insights into marketing actions.
The gearing up of investments in data analysis and the production of actionable insights is where the larger coalition loyalty management groups (that is, the "three sisters" of coalition loyalty: LoyaltyOne, Aimia, and Loyalty Partner) are strategically focussing as they all continue to expand internationally.
The keynote presentation on the first day featured Sir Terry Leahy who, as the recently retired CEO for Tesco, could arguably lay claim to have set the global benchmark for consumer loyalty programmes with the Clubcard loyalty programme that is now deployed in twelve of the company's international markets. It is not just the operation of the Clubcard loyalty programme that has set this benchmark but the original vision to see beyond the 'rewards for re-purchase' logic that had previously been the economic driver for this type of marketing initiative. It was the deeper insight into the value that this flow of customer data could unlock in terms of improved customer focus and operational efficiency that sets Leahy's record at Tesco as one of the global leaders in customer loyalty that put them so far in front of the following pack. The presentation itself covered ten key management lessons, but the core theme that Sir Terry kept returning to was the value of trust in consumer loyalty, plus the observation that 'data is priceless' if retailers really want to understand their customers better to serve them better.
The keynote speaker on the second day was Rupert Duchesne, president and CEO for Aimia, which owns LMG which operates the Nectar coalition loyalty programme in several markets. Aimia also owns Carlson Marketing (which now also trades under the name Aimia), and has a strategic focus on developing and delivering a full suite of loyalty services. The key theme from Duchesne was an echo of the earlier message from Sir Terry Leahy. The fact that 'data is priceless' has created a whole new breed of 'datarati' who are seeking to join together the many complex dots of customer loyalty, social media and multiple channel engagement to help understand consumers better. "Personal data is the new oil of the internet, and the new currency of the digital world," Duchesne observed.
Other themes that echoed this idea where to be found in presentations by speakers such as Martha Rodgers and Rick Ferguson, who independently reviewed the potential future impact upon loyalty of Generation Y, and how they will require a different approach to loyalty - probably built on mobile apps - than for their Baby Boomer parents. One of the most interesting and lively panel debates involved entrepreneur and author Tony Fish, who challenged many current perceptions involving customer data, who owns it, who controls it, and how it can be segmented in terms of attention (i.e. screen experience), intention (i.e. purchase experience), action (i.e. payment experience) and the bundling of data (i.e. settlement).
Another message that kept being debated, promoted and case studied throughout the entire conference was that huge rewards will flow to the loyalty marketing organisations that can embrace the 'datarati' approach and harness today's great wealth of consumer information, both for the suppliers benefits in terms of improved customer loyalty, and in terms of better targeted, more cost effective marketing. Ernst & Young advisory services neatly summarised this challenge in a brochure which they presented at the conference, entitled 'The digitisation of everything', explaining how organisations need to adapt to changing consumer behaviour to survive and thrive in the modern global economy. The brochure's key message is that consumer data is king, and organisations that don't respond to this imperative are facing a bleak future as existing and new competitors 'cherry pick' their best customers, deconstruct their business models, and leave them with low value, high cost customers.
This change seems to be happening very quickly, and business survival depends on immediate action, not action next year. What is also becoming apparent in all developed and some emerging economies with a low or even nil growth environment, is that if growth has already stalled then holding on to the customers you already have becomes a critical business survival strategy.
Consequently, a wealth of evidence - both factual and anecdotal - is starting to form a pattern that suggests that this trend also has the potential to raise another issue: if consumer data is the 'new oil', and if this data is priceless, who actually 'owns' the data? The Refiners are the 'datarati', who are employed by the large consumer loyalty programmes globally, while the Producers are the consumers generating this new oil that promises to lubricate commerce in the digital market place. Interestingly, the stance adopted by Tony Fish is that data is a commodity, and ownership is unimportant. His view is that value will be retained by the organisations that own the feedback loop, and by those entities that can transform raw data into actionable insights.
However, this view may not go entirely unchallenged by consumers who could start to feel that the value they are receiving in return for their data - however raw at the input level - is disproportionate to the value obtained by the datarati who market it to other organisations.
Consumers are now more connected, have access to more information, and at a lower search cost and - at least in terms of Generation Y - they are becoming more demanding of brands that supply their needs. The global market for consumer loyalty is still very fragmented, and consumers are still generally willing to exchange their personal data (or at least parts of it) in return for better deals and service from their chosen suppliers.
Apart from a limited number of data privacy concerns and viral challenges to brands that have broken a brand promise, consumers seem surprisingly passive in the face of the growth of the datarati - but will it always be this way? In this context, trust in brands is probably going to grow even more in importance as consumer data becomes truly priceless... as Sir Terry Leahy observed right at the start.