Non-grocery loyalty: An alternative to customer clubs?

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By: Wise Marketer Staff |

Posted on November 1, 2007

Non-grocery loyalty: An alternative to customer clubs?

Traditional approaches to retail loyalty and customer relationship management are becoming too focused on the experiences and strategies of the major grocery multiples, and companies with lower purchase frequencies and consumer motivations require a very different approach, according to UK-based customer strategy consultancy Beyond Analysis.

The company suggests that while there are many loyalty and CRM providers extolling the virtues of customer relationship building by means of loyalty cards, customer clubs, and store magazines, these techniques tend to work well if there is a high shopping frequency and a clear motivation for purchase decisions.

Different worlds The club card model works well for supermarkets, which have customers who visit their local store several times a week with a similar set of purchase needs across multiple product types. This gives the supermarket a good set of insights that can be used to reward the customer and encourage them to buy slightly more next time they go shopping.

The key to this model's success in cases such as Tesco ClubCard and Nectar in the UK is that there is a high shopping frequency that allows the programmes to gather data and insights that can be used to optimise the customer's experience (for example, in terms of products, pricing, range, and even store formats). That data also provides for personally tailored communications and offers for every individual customer to help change or reward their behaviour.

But for businesses whose customers don't keep coming back so often, and not always for the same products, it is much more difficult to gather meaningful data that helps marketers understand their purchase motivations, or how to be more relevant to them. Beyond Analysis believes that, while many of the fundamentals remain the same, a different approach is needed to engender loyalty in customers of these kinds of companies.

Too little, too late? The challenge for many retailers (shoe shops or opticians, for example) is that very often by the time a customer has made a purchase, the insight that can be gathered from that transaction comes too late because the customer has already left the store and may not come back for months or even years.

Another factor that works against low frequency retailers is that consumers tend to be more disinterested in maintaining any kind of relationship with these businesses, beyond what is absolutely necessary. In other words, the category doesn't play an important enough role in their life to be worth forming such emotional bonds.

Pre-emptive insights Businesses that have a lower frequency of purchase - and fewer items per basket - to act as reference points must therefore try to understand more about their customers before they come into the store (or before they go to the web site to make their purchase).

The products these companies sell are often of a higher value and have a longer shelf life in the home than supermarket products. The level of engagement by the customer at the time of the actual purchase is often far higher and more involved than any product in a supermarket, even if that engagement is short lived. And it is now normal practice for consumers to research such products online before making their purchase.

Using the same analytical techniques to develop an understanding of customer lifestyles, life stages, and behaviours, it is also possible to create a similar level of understanding about customers that the supermarkets enjoy from their loyalty programmes. The key difference is that this insight has to be derived from a different set of data and at a different stage in the purchase cycle.

Online behaviour analysis Rather than looking only at historical purchase data, low frequency retailers must also look at what their web site can tell them about customer interests and behaviour. Web site data is still largely ignored by most organisations beyond a cursory glance at traffic levels and some optimisation aimed at improving online sales or registrations.

But the data that can be gathered from web site activity holds untold riches, the company suggests. In fact, it can tell you what customers are interested in and where they are in their decision making process. And, moving another step beyond the web site, other online advertising activities (such as affiliate sales, search, advertising networks, and so on) can also provide some surprisingly useful insights into customers' preferences and interests.

As a result, Beyond Analysis concludes that e-commerce, the social web, and changes in how consumers interact with and use the web, are opening up a huge new set of data that allows retailers of any size or category to develop a deeper understanding of their existing and potential customers. In particular, this can help non-grocery retailers to benefit from customer insights in the same way as supermarkets do from the customer intelligence generated by loyalty schemes.

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