Customer Loyalty Data Efforts

ENGAGEMENT & ANALYTICS | Customer Loyalty Data Efforts

Despite changes in technology, market forces and consumer behaviour, there is always one place to center data efforts where there is reasonable expectation of success — and that is on customer loyalty

By Amy Bostock

In August of 2012, the New York Times declared 2012 “the year of Big Data.” Fast-forward to today, and the backlash against the term is in full swing. The usual consulting and IT suspects might now refer to “smart data,” “small data,” or “intelligent data” — phrases designed to demonstrate that the speaker is positioned well ahead of the data analytics curve.

According to Rick Ferguson, Vice President, Knowledge Development for Aimia, the rapid evolution of the phrase “Big Data” speaks to the speed with which technology now disrupts legacy business models and marketing disciplines.

“You have got big technology players that are all trying to own the term and define it.  You tend to see a lot of definitions centred around terms like ‘velocity’ and ‘volume’ and ‘veracity’.  But everybody has got a different definition of what big data is.  I think that is why it has gone from literally a Ted Talk topic to a punch line within the space of a couple of years.”

The birth of a buzzword

“Those of a certain age remember that, back in the late 1990’s, early 2000’s, there was a burgeoning buzzword marketing revolution around CRM, customer relationship management,” says Ferguson. “At the time, the conversation and the term were being driven by the big technology players who wanted to sell CRM software and services into big companies.  So, it is a similar situation because everybody was talking about customer relationship management and nobody knew what the definition was.  Everybody had a different definition depending on what they were trying to sell.  So, the result of all that hype around CRM was that there was a lot of money spent on CRM implementations that didn’t really have a sound, strategic purpose.  A lot of it crashed and burned.  So, a lot of companies spend a lot of money on CRM and then didn’t really have any measurable return to justify the amount of money that they spent.”

Now it seems like there is a similar thing happening with big data as big technology players all try to own the term

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. The difference, he says, is in the type of data being talked about.

“Back in the old days, if you were a customer-centric marketer, the transactional data was the brass ring.  If you knew what your customers were buying and when they were buying it and how much of it they were buying … if you could get that data and if you could even better attach it to the level of the individual customer, you were in pretty good shape because, then, you could start to understand them and build a one-to-one relationship with them and use it to deliver relevant marketing offers.  The difference now, I think, is that transactional data used to be the ceiling but now it’s the floor of your customer strategy.  And now, there is all this, what we call, unstructured data that we’re all trying to figure out how to attach to marketing.  So, social media data, mobile data, online search data, even television viewing habit data … so, a lot of big companies are trying to figure out how to take that unstructured data and match it to transactional data.”

The key, he says, is to figure out a way to start to connect some of those dots or interactions.

“I’m talking about all of the brand interactions that you might have through all these different channels that result from all the different data sources that you’re trying to collect. If you start to connect those dots, you can start to get a richer view of an individual customer.  So, connecting social media activity to transaction data and using that to figure out what influencers are … what effect they are having on purpose, whether that results in new definitions of customer value.  All of that kind of stuff is going to change.  So, that is the aspect of big data that really interests us.”

Where to start

In terms of trying to figure out where to start, we hear a lot of companies talking about ‘smart data’ and ‘intelligent data’.  Everybody is trying to come up with the next catch phrase.

“We just call it data.  And if you want to put some boundaries around what data is useful and what you should actually focus on, we just call it ‘customer-centric data’.  It’s the data that is most predictive of the value of a customer relationship.  So, that is where we encourage our clients to focus their efforts and that is where we focus.  So, it starts with the transaction.  And then, you work out from there and try to connect those data dots, whether it’s online search activity or social or mobile.  You start to connect a few of those dots and then you can really start to develop some insight that allows you to focus your efforts.  You don’t have to worry about drinking from the fire hose.”

Connecting the dots

On the social side of things, Ferguson has some top picks for who has figured out how to connect the dots.

“In the U.K., we operate the Nectar Loyalty Program which is the largest loyalty program in the U.K.  We’ve done things like build mobile apps with our partner, Sainsbury’s (one of the core sponsors of the Nectar program).  So, we can actually see how customers are using the app in the Sainsbury’s stores, what offers they are responding to and are able to connect that mobile data back to the core purchase.  We also have the ability to use the Yahoo Search toolbar and allow members to sign in as Nectar members.  Then we can take a look at how their search history influences their shopping behaviour and as a result we can design advertisements that deliver better return than we could otherwise.”

Another successful program, he says, is the Starwood Preferred Guest Program.

“A few years ago, they developed a social media portal so that Starwood guest members could log in with Facebook, Twitter or one of your other social media log-ins.  And then, you have access to a community forum where you can share information with other Starwood members and talk about the properties and get tips and then interact with the brand itself.  What they discovered was that heavy social media users were also amongst their best customers. They tended to stay more and they tended to spend more on property when they were there.”

As a result, Starwood Properties were able to start using some of that information to develop new models of customer value that they didn’t have before and to start to segment their customer base and member base differently based on the fact that now they knew that heavy social media use within this platform was predictive of customer value.

I am Canadian…I am loyal

Ferguson believes that similar loyalty initiatives could work equally well in Canada, particularly around the mobile space.

“We just did some research with Columbia and released a white paper called ‘The Rise of the M-Shopper’.  We looked at the ways consumers use mobile devices in retail environments.  Our definition of an M-Shopper is a mobile-assisted shopper, so anyone that told us they used a mobile device in a store, whether it was to check for lower prices or to send a note through social media or to read a product review online.  There are all kinds of different ways that consumers use the devices in store.

The research looked at what types of behaviour are manifesting themselves, for example, the hype around the show-rooming topic over the past few years.  What they found was that when it comes to shoppers that actually do predatory show-rooming, where they literally walk into the store to look at the flat screen TV, knowing that they are going to buy it online, that universe of customers is actually quite small.

“Among M-Shoppers (survey included 3,000 consumers in the U.S., U.K., and Canada), we found that the predatory show-roomers, we call them ‘exploiters’, is about 5 per cent.  So, it is a really small group.  But the other segments that we looked at, what we called ‘savvy M-Shoppers’  were folks that were aware of price discrepancies and were possibly going to buy online but were still persuadable.  We looked at experience seekers, the folks that actually value the in-store experience and what we called the ‘traditionalists’, the folks that prefer the brick and mortar experience.  If they use their mobile device in-store, it was mainly to do a product review check or to ask advice from their social network.  In Canada, the traditionalist segment is actually quite large, compared to the U.S. and the U.K. segments.  So, I think it was 30 per cent overall, the traditionalist segment.  And when you aggregate all of our survey responses within Canada, it is about 50 per cent.  So, I’m not sure why that is, other than there is a large segment of Canadian shoppers that use mobile device in-store that prefer the in-store experience and are willing to trade that experience for a higher price — that was interesting to us.  So, all that is to say that I think there is a real opportunity for retailers, particularly brick and mortar retailers, to embrace the mobile experience in-store and start to figure out ways to use that device to build relationships.  And then, the data that they collect from those interactions could prove to be quite valuable.”

Creepy versus clever…where to draw the line

“We, as a company, put a stake in the ground and we wrote a white paper called ‘The New Data Values’.  It was written by our COO, David Johnson.  And we think that the future is in opt-in, transparent, clear value exchange use of data, which you can use the loyalty programs … a microcosm of that, the way that could look,” says Ferguson. “Because within the loyalty program environment, if you sign up for a retail loyalty program, because of the fact that the program has been around for so long and because they have been so successful and because they are pretty big with us in Canada, as well as most other developed markets, customers have a really clear idea of what is happening.  So, they know that signing up for the program … they are opting into data collection for the most part.”

They might not understand precisely how it works, he says, but they have a vague idea that you are collecting information about them.  But, and this is a big one, they also understand that they are getting something for it, that they are getting recognition and reward.  They are getting points or miles.  They are getting more personalized and relevant offers.  If they are good customers, they might get some recognition that, as good customers, they might not get otherwise.

“On a larger scale, we think that is how you can toe the line on a positive side.  The way we expressed it was with an acronym called TACT, which stands for Transparency, Added-Value, Control and Trust.  Whether we are operating our own programs or whether we are building programs on behalf of clients, this is the hill that we will march towards, which is that data collection should be transparent so that consumers have a very clear understanding of what data you are collecting, why you’re collecting it and who else sees it.  It would be a move away from an incomprehensible 60-page T&C document to a very short, concise, clear idea of what it is that you are collecting and why.  And then, added value references the reward, the recognition element.”

Guardians of your data

The secret to a successful loyalty program lies in giving your customers a high degree of control over that relationship and to act accordingly as a trusted guardian of your consumer’s data.  So, it is about data security, data management, data sustainability and making sure that, in every case, if you are going to share that data with a third party or partner, that your consumers understand that that is happening and why and what they are going to get out of it.

 

“It is a journey,” says Ferguson, “and we take a forward-looking position.  Like the rest of the industry, we have a lot of work to do to get to that hill where we can plant the flag.  But we have said that that is the direction we’re going.  We certainly encourage ourselves and our clients to stand behind a set of data values, whether you use the TACT acronym or something else.  We think that that will point the way towards a future that stays on the positive side of the line that we were talking about.”

Research conducted by AIMIA a few years ago made it pretty clear that, within the universe of loyalty programs, there is a much higher level of comfort when it comes to sharing personal information, compared to general marketing.  Loyalty programs are viewed as kind of a safe haven by both millennial consumers and older consumers.  The main difference the survey found was that millennial consumers, overall, are a bit less concerned with data privacy and security.  They are more willing and open to share information online.  But they also have a much more developed sense that they should get something in exchange for that personal information.

“They are aware that their personal data is worth something.  So, that was interesting.  But for all age groups, loyalty and reward program environment was viewed as a safe haven. I think it’s because the programs are ubiquitous and have been around so long.  Again, there is that clear expectation of getting something in return, which, I think, raises the level of trust.”