LOYALTY MARKETING
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SECTION TWO
Personalization and Targeting Enhance Loyalty Marketing

By Ross Ely

In years past, loyalty was about delivering benefits to customers. Where retailers are going now is where
CPG has been for some time. It’s all about gathering shopper data. In fact, you can almost think of loyalty programs as a quid pro quo, where shoppers will give permission to use their data in exchange for offers that are personalized to them and really relevant to what they’ve purchased already or what they might purchase.

In fact, the data is really a lot more useful than just for CRM. For example, Kroger uses shopper data to inform all the elements of how they make decisions – from the stores and the assortment to customer service and how the associates engage with customers. And even how they use private brands. CRM is only one of the applications of shopper data. The real resurgence with retailers has been the resurgence of data overall.

One thing about retail loyalty programs is that typically they have great participations. For most of the retailers we work with, the vast majority of their shoppers participate in loyalty programs, which really gives you a rich amount of data to work with. What we really hold as the goal for retailers is that 60 percent of all of their shoppers’ trips ought to be identified, and 80 percent of all their sales. That gives you enough of a rich set of data that you really can make informed decisions about targeting.

Once retailers collect this data, what are they doing with it today? There are really two key areas: The first is shopper segmentation. When we work with retailers, a lot of them say, “I just don’t really know my shoppers and I don’t have a good perception of who my best shoppers are and how I can market to them in a personalized way.”

We work with retailers to segment their shoppers. Who are their highest volume shoppers? Who are their most profitable shoppers? Who are new shoppers? Who are the category affinity shoppers in areas like baby and pet? Also, a big program we run for retailers deal with shoppers who previously bought a high level and – for whatever reason – have slipped down to a lower level.
   
Once you have these shoppers identified. what do you do to retain and grow their business?  The key is that you provide them with personalized and targeted offers. Since you know what they are buying, you can customize the offers sent to them.

With the technology that is available today, even a one-store operator can run the same type of a rewards program that gathers data just like a national chain. This gives them a much greater return on their marketing investment compared to the traditional paper flyer.

If a retailer is going to run personalized offers, they are going to see higher redemptions. That brings higher sales, which in turn drives even more data around which a retailer can build even better personalized offers. So it really works in a retailer’s favor and make them use and rely on the data even more.

One of the areas that we see retailers interested in is promotions to retain and grow their top shoppers. The 80-20 rule really applies to grocery – almost. It turns out that 30 percent of the shoppers drive about 80 percent of the sales. So it’s vital for retailers to grow and retain their top shoppers. Another key area is to reactivate downward migration. It’s really important for retailers to maintain their top shoppers at high levels and to move them back up if they slip back down.
 
Another thing that retailers like to do is grow some of the occasional shoppers into top shoppers, and then do things for new shoppers like offer them a welcome kit as an introduction to the store. Also, retailers love to have clubs for specific categories of shoppers in areas like wine and baby.

Let’s look now at a number of specific programs that we’ve run that uses personalization. The first one is a targeted coupon at checkout for one of our mid-sized retailers on the East Coast. A shopper at checkout gets a coupon targeted specifically to her. It’s based on what she’s bought in the past on her recent visits. It’s built in one of three areas:

  • Basket Expander: If she is spending $50 a week for the last several weeks, she gets a special benefit by moving shopping to $75 a week.
  • Category Reminder: If she has been buying produce for the last several weeks, but there was a void in the most recent week, she gets a coupon for something in the produce section.
  • Category Suggestion: She is a top shopper in the store, but has never bought in the meat department. Here’s a special coupon for meat.

The results from these programs have been very strong. What you look at is the behavior of the coupon redeemers vs. the general population. What they found was that sales essentially doubled. Basket sizes up by 100 percent. Overall sales were up $150,000 per week. The ROI of the program was over 100 percent.

Another program is the downward migration program. This was done by one of our retailers in the Midwest. When they found shoppers that lapsed from, say, a top-shopper level down the next level, they wanted to run programs to bring them back up. They issued special coupons that said, “Come back and see us and we’ll give you $10 off your next shopping trip.” They measured the performance and were pleased with the results. Some 30 percent of shoppers who had lapsed down to a lower level returned to their previous shopping level. The overall increase in sales among those shoppers was 30 percent, and the ROI was over four times.

Another program dealt with scoring digital coupons. A lot of our retailers are using digital coupons today, but are using them in a very untargeted format. It’s the same set of digital coupons that get promoted to everybody.  So we took each digital coupon and scored it against each individual shopper. Has the shopper shopped in that particular category before? Have other shoppers in the same store bought that item or category? In that way, we assign a score to each digital coupon.

When the retailer mails the digital coupon to the shopper, or the shopper visits the website and pulls up the digital coupon section, they see coupons that are personalized to them based on those criteria as opposed to just generic digital coupons. We found a very strong response to the digital coupons.

In summary, shopper data is a key area for retailers today. They care about the data as much as the brands do. Previously they thought about category management, but now it’s been expanded to include shopper information management.

One of the great ways to use shopper data is for personalized targeted offers. We find they drive better redemption, much better sales and margin, and much better return on investment for the retailer’s marketing spend.

  
Ross Ely is president and CEO of ProLogic Retail Services, a provider of loyalty and consumer relationship marketing services for the grocery industry. For more information, please visit: www.prologicretail.com.

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