Strategic Consulting to a Grocery Retailer
...seek’. As in Tesco’s case, a data enabled loyalty program can help you to bridge the knowledge gap. The opportunity to look into each basket, knowing what the profile of that customer is and what the household prefers to buy can give you the capacity to minimize the risk of all promotions. The transactional history of millions of customers bridges the gap between how your customers think they act, reported through selective research panel and what they really do when they are shopping. And that is valuable information. - Data Management Before starting your loyalty program, robust data management systems are required. Data storage analysis and store customer service need to be planned for and monitored and a compelling message required so that customers would join the program. You need to take a pragmatic approach to data and answer the question – what can we realistically do and will it make profit? Do not try to analyze all the data in the first instance. It is acceptable to look at some of the data initially to get trends. You can get more sophisticated gradually. The challenge of analyzing every purchase of every loyalty program member may initially be beyond the technology. The insight from the dunnhumby team for Tesco was not to struggle in making sense of all data on all customers, but to use a matrix of data samples to achieve a statistically valid picture of customer behavior. We recommend that you use the results from a few trials, analyze the data and apply it to the rest of the business. Importantly, the analysis needs to have a sales focus. - Internal Marketing To leverage the database for an effective loyalty program, there needs to be a complete buy-in and support from your employees. They need to be trained and committed. It requires a change of mindset because customer service happens at every touch point. Your front line staff should be informed and closely involved at every key stage. They act as marketers for the scheme and they back the advertising messages in their dealings with customers at the local level. - Segmentation Use the data for meaningful segmentation. The data should lead to the creation of new customer groupings that are large enough to be cost efficient to use, but with a richness of common interest to be truly meaningful as a way to picture customers. Any segmentation strategy in retail has to be practical, scaleable and replicable. It has to produce results cheaply enough, quickly enough and flexibly enough to be useful in the existing conditions of the business. Segments must be identifiable, viable and distinctive. Tesco’s segmentation methods evolved over time from RFV segmentation to lifestage categorization to lifestyle to shopping habits. It is important to note that segments are dynamic and customers within segments are dynamic and can move from one to the other. - Measurement An important characteristic of data enabled loyalty programs is that it allows you to measure customer loyalty as well as the success of the specific activities. You can experiment with prices and product range to see what works and what does not at store level. You can try out different promotions on a small scale and if they are successful, expand them. A lot of risk of innovative marketing can be taken out by testing ideas and offers with small groups. The analysis of results from previous campaigns can enable you, as it did Tesco, to predict what will occur next with ever improving accuracy. Customer loyalty can be measured through a RFV (Recency, Frequency and Value) analysis with the success criterion being ROI (Return on Investment). Measurement gives clear guidance on what needs to be done next. - Privacy Customers have to be comfortable with your company before they will be willing to share their personal demographic data or purchase behavior with you. To get consumers to share additional behavioral data, there needs to be clear ...