New research reveals that database marketing and loyalty schemes remain the key to connecting with customers, according to Andy Wood, managing director for GI Insight, who here explains how and loyalty programmes have become the driving force behind stronger customer relationships and intimacy.
GI Insight produced is first 'Customer Intimacy Index' in 2010, carrying out a UK-wide survey of consumers and asking them to assess the companies they regularly buy from on a sector-by-sector basis to determine how well customers feel these organisations know them - with the strength of ratings ranging from a familiarity worthy of 'a close friend' to the lack of intimacy shown by 'a total stranger'.
With the consumer landscape and the mix of tools companies use to build customer relationships changing considerably in three years, GI Insight re-commissioned the research to update the findings and see which sectors have cleaned up their act, which have maintained their position, and which have slid down the rankings since the last Index three years ago.
The overall aim of the 2013 Customer Intimacy Index was to provide a well-grounded picture of whether companies in various sectors are using their data effectively to establish a level of intimacy with their customers through personalised and targeted communications and how this has changed three years on. The consumers surveyed based this rating on whether the communications they received - by mail, email, telephone or mobile - indicate that their data is being put to good use in helping to build and maintain ongoing relationships with customers. Since the previous Index, smartphones, social media, tablets, and other developments in the era of 'Big Data' have transformed the marketplace.
The results of the study - based on a survey of around 1,000 consumers representative of the UK in terms of gender, region, age and social class - were used to calculate an average score for all sectors. GI Insight used these figures to create the Customer Intimacy Index, with a score of 100 representing the total overall average. 'Smartphone makers' and 'home furnishings/DIY' were added as new categories in 2013, with the rest appearing in the 2010 Index. The 2013 Index revealed some expected results and reflected the impact of some of these changes, but some sectors were surprisingly - even shockingly - weak relative to other sectors given the data capture capabilities and the communication technologies at their disposal.
The 2010 Index showed that sectors with frequent transactions, regular customer contact and strong loyalty programmes among key players fared best, and these findings remain extremely familiar three years on. Supermarkets still hold onto the top spot (up from 126 to 132) and banks have jumped up to second, going from 116 to 125. Mobile service providers have gone from fifth place up to third, and along with entertainment providers and smartphone makers make up the top five sectors next to supermarkets and banks. The high scores of the top five indicate that these are the sectors that are using their customer data correctly and have therefore been described by their customers as 'knowing them like a close friend'.
At the other end of the table are car manufacturers and alcoholic drink brands, both of which have actually gone down in the Index over the last three years. Car manufacturers have slipped from 80 to 76 and the alcoholic drinks brands - at the very bottom of the table - have gone from 72 to 62. These were the industries that customers said treat them 'like a total stranger', and the reasons behind this do not seem to have changed much since the last index. Car manufacturers and other large, one-off or infrequent purchases such as computer or tablet brands are unable to build ongoing relationships. Similarly, the direct contact that drinks brands have with customers is often through third parties such as supermarkets, making it difficult for them to build strong customer bonds. One of the most significant drops was for the charity sector, which saw its average drop 11 points in the Index to 86. This reflects the huge struggle charities are facing when investing in database marketing in the current economic climate.
The Index also focused on the differences of the various demographics - such as age and gender - and looked into the significance of these results. One of the key findings was that women tend to feel less warmly embraced than men by the companies they deal with. Women scored all sectors an average of 94 compared to men, who rewarded an average of 106. Age was also examined, where it became apparent that businesses across the board seem to be doing a much better job of connecting with younger consumers. This may not come as much of a surprise considering the younger generation's involvement in digital media and the vast amount of data that can be gathered on them. This also means that companies in nearly all sectors are taking advantage of the surge in smartphone and tablet use. The problem with this, however, is that whilst companies are able to engage with younger consumers through these technologies, they are also at risk of alienating the older generations.
The 2013 Customer Intimacy Index showed that there is an uneven landscape across the various sectors when it comes to engaging with customers. For the industries that are at the bottom of the table it is clear that a lot more needs to be done to prove to their customers that they know them, their wants and their needs well. They must be attentive to these customer requirements and have proper structures in place to not only collect the necessary information, but also put it to proper use. The results of the Index suggest that loyalty schemes are proving the most effective way of doing this, allowing companies to gather the large amount of customer data and track and respond to the patterns that emerge. This is clear in the Index, with industries that use loyalty schemes ranking much higher thanks to their ability to form stronger relationships with customers.
For the industries nearer to the bottom of the table there are lessons here to be learned. The fact that other firms in their sector are also performing badly gives these companies an excellent opportunity to take advantage by establishing a level of intimacy with customers that gives them a good lead on their competitors. The Index also highlights for the higher ranking sectors the importance of acquiring data and applying it precisely. The specific targeting, tailoring and personalisation made possible by database marketing - particularly loyalty schemes - is fast becoming an indispensable tool in creating long-lasting customer bonds. With new technologies available the consumer landscape is constantly changing, so companies need to have sophisticated multichannel strategies in place to capitalise on this and create strong customer relationships.