Many companies are unintentionally delaying the benefit they could achieve through better use and understanding of their customer and loyalty programme data, simply because they are too focused on the marketing-related benefits of their programmes, according to customer insight experts at Beyond Analysis.
The company warns that there are plenty of myths surrounding customer loyalty cards and rewards programmes. For example, there's the one that says a customer loyalty scheme must create a unique bond of communication between the business and the customer in order to derive actionable insight.
In August 2005, investment bank Cazenove produced a report on the UK's Tesco supermarket chain, entitled 'Ten ways Clubcard data helps Tesco win', which found that 90% of the benefit to the retailer came from EPOS data alone. Beyond Analysis suggests that the most talked-about benefit of such a loyalty card - the ability to communicate directly with the consumer - is actually just a bonus.
So, because behavioural insight is all about understanding the customer, many executives believe that its benefit lies in helping the marketing department to influence the customer. But there are many other retail levers that can be pulled with the help of customer insights. Marketing clearly has a lot to gain because return on marketing investment (ROMI) can be most easily measured by analysing customer data. But a loyalty programme is also often used to direct increasing numbers of messages at customers, rather than trying to better understand their needs so that the business can serve them more effectively.
It is easy to illustrate how customer insight derived from EPOS data alone can have a significant impact on the way businesses understand their customers and respond to their demands.
A business can potentially use its transaction data to understand what is - and what is not - driving it forward, by asking several simple questions, such as:
- What are the most important products for my most loyal customers?
- What gaps exist in my range?
- How much space in each channel should I allocate to each range or product?
- On which products does price perception matter most to my customers?
- What promotions should I run, which should I remove?
- What are the right services to offer my customers?
Once these questions have been answered (although this is typically an unending cycle of learning because customer needs will always continue to evolve) the business can determine how to respond and change to build a firmer foundation of happy customers.
At the same time, businesses need to make sure that the marketing and insight investments they do make are the right ones. Questions that should be asked should include:
- Which stores are performing, which are underperforming?
- Which stores might be suited to a different layout?
- How do I optimise layout for new stores to maximise sales per square foot?
- Which stores exhibit similar catchment area characteristics to my new site?
- What are the key product groups for my customers in these stores that I should consider for my new store?
A detailed analysis of customer transactions - which can be made easier and more segmentable by the additional of loyalty programme data - can answer all of these questions, and these customer insights are needed to make better informed and risk-free capital expenditure decisions.
According to Paul Alexander, CEO for Beyond Analysis, a company can actually achieve both marketing efficiency and operational efficiency without necessarily having a loyalty scheme, but if the business does already have a loyalty card, there are many benefits outside of the marketing department that are often overlooked.